The Impact of Monetary Policy on Insolvency Risk at Vietnamese Commercial Banks

Mai Thi Phuong Thuy

Abstract: The study assesses the impact of monetary policy on Vietnamese commercial banks' insolvency risk during the 2008-2017 period, with balanced panel data for 30 commercial banks in Vietnam. Results from the study show that an increase in the M2 money supply creates an increase in the Z index, which means a reduction in the risk of insolvency. The expansionary monetary policy increases real estate prices, collateral value, and bank capital, resulting in higher asset value for the bank. As a result, both deposit growth and credit growth in the economy have positive signs; therefore, the activity of commercial banks results in efficiency and improved profit, reducing the risk of insolvency. This result is consistent with the Borio and Zhu (2012) reports.

Keywords: monetary policy, insolvency risk, System GMM method

How to Cite?: Mai Thi Phuong Thuy, "The Impact of Monetary Policy on Insolvency Risk at Vietnamese Commercial Banks", Volume 9 Issue 7, July 2020, International Journal of Science and Research (IJSR), Pages: 796-800, https://www.ijsr.net/getabstract.php?paperid=SR20701114245, DOI: https://dx.doi.org/10.21275/SR20701114245