Financial Stability of Vietnamese Banks: A Quantile Regression Approach with Z-Score Analysis

Abstract

This research evaluates the determinants of financial stability of Vietnamese listed commercial banks from 2008–2022, emphasizing the effects of internal bank variables and macroeconomic variables. Applying the approach of OLS regression and Quantile Regression (QR), the research presents a full image of the effects of bank capital, non-performance ratio, liquidity, net interest income, cost/income ratio, provision for loan loss, bank concentration, inflation growth, and economic growth (GDP) on commercial banks' financial stability. The findings suggest that bank capital, liquidity, and provision for loan loss positively affect commercial banks' financial stability, while economic growth and bank concentration may have adverse effects in some specific groups of banks. The Quantile Regression results suggest that these variables have different effects on specific banks, especially with banks of a high stability level significantly affected by bank capital, while medium and low stability banks are controlled by credit risk and profitability. These results have significant practical contributions for commercial banks, regulators, and policymakers in designing suitable plans aiming at promoting commercial banking stability in Vietnam to adapt to international economic integration in the future. Ensuring sound capital ratio, controlling credit risk, and adapting policies based on each group of banks is beneficial for strengthening risk resilience and sustainable development in the context of international economic integration in the years to come.