Does bank market power buffer the effect of macroeconomic uncertainty on bank stability? The role of foreign bank presence in Vietnam

Type of the article: Research ArticleAbstractThe purpose of this study is to determine whether bank market power moderates the effect of macroeconomic uncertainty on the stability of Vietnamese domestic commercial banks and whether this moderating effect varies with foreign bank presence. Using panel data for 28 banks from 2010 to 2025, the analysis combines two-step System GMM, Double Machine Learning (DML), and SHAP-based interpretation to examine dynamic and heterogeneous relationships. System GMM results indicate that macroeconomic uncertainty is negatively associated with bank stability. Although market power has a weak negative standalone association with stability, it partly attenuates banks’ exposure to uncertainty. Foreign bank presence is also negatively associated with stability, while evidence that it weakens the buffering role of market power is confined to the branch-based measure; the corresponding asset-share interaction is statistically insignificant. DML yields insignificant average effects but identifies substantial cross-bank heterogeneity: vulnerable banks experience more adverse conditional effects, whereas financially stronger banks demonstrate greater shock-absorption capacity. SHAP analysis provides complementary predictive, rather than causal, evidence on these heterogeneous patterns. The findings qualify both the competition-fragility and competition-stability perspectives by showing that the role of market power depends on macroeconomic uncertainty, foreign institutional presence, and bank-specific resilience.