THE IMPACT OF CAPITAL BUFFER ON CREDIT RISK IN THE VIETNAMESE BANKING SYSTEM
DOI:
https://doi.org/10.37569/DalatUniversity.16.1.1387(2026)Keywords:
Capital buffer, Credit risk, Nonlinear, Vietnam.Abstract
This article examines the impact of capital buffer on credit risk in the Vietnamese banking system and whether external factors such as the COVID-19 pandemic and capital regulation influence this relationship. Regression results on a sample of 31 Vietnamese commercial banks from 2010 to 2022 indicate that increasing capital buffers reduces credit risk. However, when capital buffers reach a sufficient level to create a protective cushion for banks against potential losses, banks become more willing to make risky lending decisions that increase credit risk. The research findings reveal that the COVID-19 pandemic did not affect the relationship between capital buffer and credit risk, and that the implementation of Basel II capital adequacy regulations increased the capital buffers of banks and significantly reduced credit risk. This article bridges the gap in the literature regarding the impact of capital buffers on credit risk in Vietnamese commercial banks and provides important implications for bank managers as well.
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