Tác động của chính sách tiền tệ đến rủi ro mất khả năng thanh toán của các ngân hàng thương mại việt nam tt tiếng anh

MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM BANKING UNIVERSITY OF HO CHI MINH CITY MAI THI PHUONG THUY THE IMPACT OF MONETARY POLICY ON THE RISK OF INSOLVENCY AT VIETNAMES

MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM

BANKING UNIVERSITY OF HO CHI MINH CITY

MAI THI PHUONG THUY

THE IMPACT OF MONETARY POLICY ON THE RISK OF INSOLVENCY AT VIETNAMESE COMMERCIAL BANKS

SUMMARY OF DOCTORAL THESIS IN ECONOMICS

MAJOR: BANKING AND FINANCE CODE: 9340201

Supervisors: Assos Prof Dr Tran Hoang Ngan

HO CHI MINH CITY -2019

LIST OF WORKS RELATED TO THE THESIS HAS BEEN

PUBLISHED

1 Mai Thi Phuong Thuy (2018), “The impact of monetary policy to economic growth

in Vietnam”, Review of Finance, 11/2018

2 Mai Thi Phuong Thuy (2018), “Liquidity risk, credit risk and the insolvency of

commercial banks”, Review of Finance, 11/2018

3 Mai Thi Phuong Thuy (2018), “The impact of management board 's size on the risk acceptance of joint stock companies in Vietnam”, Review of Finance, 6/2018

4 Mai Thi Phuong Thuy, Truong Nguyen Tuong Vy (2018), “Impacts of corporate

management on capital structure of enterprise”, Review of Finance, 7/2018

5 Mai Thi Phuong Thuy, Bui Thi Diep (2018), “Factors of liquidity risk of commercial

banks in Vietnam”, Review of Finance, 5/2018

6 Mai Thị Phương Thuy (2015), “The influence of macroeconomic shocks in Vietnam's

bad debt”, Economy and forecast review, 8/2015

CHAPTER 1 GENERAL INTRODUCTION

1.1 Reason to choose the topic

The risk of insolvency is one of banking critical risks in the recent period, especially when global crises in general and each region in particular occur continuously Studies of Laetitia, Strobel and Frank (2013), Mohamed Aymen Ben Moussa (2015) show that the insolvency risk states an important position in the types of risks related to the existence of

a banks and sometimes a nation's financial system In which, the issue of ensuring solvency

is very important to the existence and development of banks The solvency at the bank's point must be understood to immediately respond to customers' withdrawal at times When banks lose their liquidity, the economy will fall into gloom In fact, this has been verified through the recent world economic crisis in 2007 - 2008, the risks of subprime credits lead

to the insolvency and bankruptcy of corporations and companies Major banking companies such as Lehman Brothers, Merrill Lynch pushed the US economy into recession

Previous Experimental studies about the impact of monetary policy on the risk of bank insolvency show many different results Therefore, studies of how the change of bank's insolvency risks the shock of monetary policy have been interested in economists since the classical period Due to these reasons, this paper works on "The impact of monetary policy on the risk of insolvency at Commercial Banks" to make a doctoral thesis

1.2 Research gap

Previous researches exist gaps include:

First: Previous studies in the world about the impact of monetary policy on the risk

of losing the liquidity of commercial banks according to different aspects, thus showing result from many multidimensional according from many area of studies together

On the other hand, researchs on this impact in Vietnamese commercial banks receive limited attention, and therefore no public announcement in Vietnam really discuss throught it

Second: The summary of the previous relevant studies shows that the basic interest rate is the main policy instrument That represents the variable monetary policy used by the Central Bank in research samples It used to implement the impact of this instrument’s risk of insolvency to the central banks, so these researchs do not clearly differentiated the effectiveness of each monetary policy tool While in Vietnam, a mix of non-interest instruments is often used to support or replace interest-based monetary policy

Thirdly, the previous documents mainly study some specific characteristics of banks such as the size and capital structure, the ability to capitalize on the influence of monetary policy on bank risks, while macroeconomic conditions, institutional quality and transparency of policies affecting this channel are still limited There are no studies at the same time to check the impact of individual characteristics of banks, such as capital scale and structure, capitalization, income composition and capital and specific elements of the economy such as: economic growth rate, inflation rate, institutional quality or policy transparency for this impact

1.3 Objectives of the study

The overall objective of the study is to assess the impact of monetary policy on the risk of insolvency of Vietnamese commercial banks under the influence of institutional quality

To achieve the overall goal, the study has the following specific objectives:

- Measuring the risk of insolvency of Vietnamese commercial banks

- Check the impact of monetary policy on the risk of insolvency of Vietnamese commercial banks

- Check the impact of monetary policy on the risk of insolvency of Vietnamese commercial banks under the influence of institutional quality

- Providing solutions for the State Bank of Vietnam to administer effective monetary policies to help Vietnamese commercial banks limit the risk of insolvency

1.4 Research question

To achieve the research goal, the topic answers the following research questions:

- What is the level of risk of insolvency of Vietnamese commercial banks over the past time?

- How is the impact of monetary policy on the risk of insolvency of Vietnamese commercial banks?

- When the institutional quality changes, how does the impact of monetary policy

on the risk of insolvency of Vietnamese commercial banks change?

- In order to manage the monetary policy effectively and limit the risk of insolvency, what solutions should be implemented and how should the SBV adjust monetary policy?

1.5 Object and scope of the study

Subject of research: the impact of monetary policy on the risk of insolvency of commercial banks

Scope of the study: Research and use balance sheet data for 30 commercial banks

in Vietnam in the period from 2008 to 2017

1.6 Data and research methods

Methods of analysis and synthesis

Method of estimation: This study performed regression of models by System GMM method - SGMM by Arellano & Bond (1991)

1.7 Research significance

In this study, the author measures and evaluates how monetary policy affects the level of risk of insolvency in Vietnamese commercial banks in the period of 2008-2017 In addition, investigate factors that regulate the impact of monetary policy on the risk of bank insolvency such as: characteristics of banks, macroeconomic conditions, and institutional quality and transparency of policy Research has specific contributions:

Theoretically: the research results will contribute to the theoretical basis of the risk

of insolvency, monetary policy, the impact of monetary policy on the risk of insolvency of commercial banks In addition, the study provides a systematic overview and overview of empirical evidence in the world over this impact in terms of the influence of the characteristic elements of the bank, the characteristics of the background economy

1.8 Research structure

In addition to the preamble, conclusion, list of abbreviations, list of tables, lists of references and appendices, the thesis content includes 5 specific chapters as follows:

Chapter 1: General introduction

Chapter 2: Basis of theory and empirical evidence about the impact of monetary policy on the risk of insolvency of commercial banks

Chapter 3: Methods and research data

Chapter 4: Research results and discussion

Chapter 5: Conclusion and policy implications

CERTIFICATION ON THE IMPACT OF MONETARY POLICY ON THE RISK

OF INSOLVENCY AT COMMERCIAL BANKS

2.1 The theory of monetary policy

2.1.1 Monetary policy concept

In short, monetary policy is a part of the overall economic policy system of the State

to implement macro management for the economy to achieve socio-economic goals in each phase certain paragraph Monetary policy can be understood in the broad and ordinary sense In a broad sense, monetary policy is a policy of regulating the entire amount of money in the national economy in order to influence the four major objectives of the macro economy, on the basis of which the basic goal is stable determine the currency, maintain the purchasing power of the currency, stabilize the price of goods In the usual sense, the policy is concerned about the amount of additional supply in the coming period (usually one year) in line with the expected economic growth and inflation index, if any, of course also to stabilize determine currency and stabilize commodity prices

2.1.2 Objective of monetary policy

In designing policy objectives, policy makers form many different levels of objectives, including ultimate goals, intermediate goals, and operational goals The ultimate goal of monetary policy such as output, inflation or employment To achieve this goal, planners will design intermediate goals such as money supply targets or interest rate targets But before that, to reach the intermediate goal, it is necessary to build operational goals In order to design the operational objective, it is necessary that the central bank should have corresponding policy tools These objectives of monetary policy are detailed

as follows:

2.1.2.1 The last goal

The ultimate goal includes: stabilizing prices, curbing inflation, stabilizing exchange rates, stabilizing interest rates, stabilizing financial markets, economic growth, reducing unemployment rates

2.1.3 Tools of monetary policy

According to Mishkin (2013), the SBV decided to use the tool to implement the national monetary policy, including refinancing, interest rates, exchange rates, compulsory reserves, open market operations and tools, other measurements

2.1.4 Transmission channel of monetary policy

According to Chatelain et al (2002); Mishkin (2009), Cecchetti (1999), Ganev and colleagues (2002), monetary policy can affect the economy through four main transmission channels: interest rate channel, credit channel, exchange rate channel and channel properties, specifically as follows:

2.1.5 The effectiveness of monetary policy

Along with fiscal policy, monetary policy is the two main tools for policy makers

to implement macro objectives And to measure the effectiveness and usefulness of fiscal and monetary policy to economic activity, economic researchers often use the IS - LM model

2.2 Theory of risk of insolvency at commercial banks

2.2.1 The concept of risk of insolvency at commercial banks

* Solvency of commercial banks

Solvency has become an urgent issue in practice for the banking system In the academic aspect, the concept of solvency is mentioned in studies, such as:

BIS (2009) defines the solvency of commercial banks as a specialized concept of the bank's ability to both increase its assets and meet its debt obligations when it is due without excessive losses to permission

According to Duttweiler (2009), the solvency of commercial banks is the ability of banks to promptly and fully meet the financial obligations arising in the course of business operations such as payment of deposits, loans, payments, and other financial transactions

In summary, the solvency of commercial banks is the ability to access assets that can be used to pay with reasonable capital costs as soon as capital needs arise The task of maintaining adequate solvency is one of the top jobs, criteria of each bank, playing an important role in the transfer of business capital, and thereby affecting the situation of operations business of commercial banks It can be said that solvency is a very sensitive issue in the bank's business operations A bank with insolvency will quickly go to the brink

of bankruptcy and affect the stability of the entire system

*Risk of insolvency of commercial banks

According to Lastra and Schiffman (1999), the risk of insolvency is a situation of insolvency, which can be defined in two ways First, it is a failure to repay financial obligations when due Second, it is the status of liabilities in excess of assets on the balance sheet Thus it can be understood that the risk of insolvency is an unexpected event that

occurs when an individual or an organization cannot fulfill its financial obligations to the lender when it is due This risk can often lead to bankruptcy of an organization

2.2.2 Measuring the risk of insolvency at commercial banks

Researchers often use Z t of pig c joy of Mohamed Aymen Ben proposed Moussa (2015) c tailstock can:

𝑍 − 𝑐𝑜𝑟𝑒 =(𝑅𝑂𝐴𝑖,𝑡) + 𝐸𝐴𝑖,𝑡)

𝜎(𝑅𝑂𝐴𝑖,𝑡)Inside:

ROA i,t: represents the return on total average asset of bank i in year t

EA i,t: denotes the average equity ratio on the total average asset of bank i in year

t

(ROA i, t): standard deviation of ROA of bank i in year t

2.2.3 Impact of insolvency risk

The risk of insolvency is one of the rare risks but has a great influence on the operation of banks This risk means that banks are falling into financial distress and without timely measures, the possibility of bankruptcy is very high However, in fact, there is no clear and specific regulation on bankruptcy, so most Vietnamese banks , when falling into insolvency in the long term, will often go to merging, merging with other banks Lack of insolvency affects not only the bank itself, but also the financial system of a country Typically, large banks will be helped by the central bank, typically as the case of banks losing their solvency due to rumors However, it is also this action that could make the central bank face the problem of changing the current monetary policy, so that it can both regulate the macro economy and bring the bank get out of insolvency

2.3 Impact of monetary policy on risk of insolvency of commercial banks

Previous studies focused on the two main groups of monetary policy risk to the insolvency of commercial banks: The first is that the expansionary monetary policy increases the risk of incapacity payment of commercial banks The second direction refers

to an expansionary monetary policy that reduces the risk of insolvency of commercial banks

2.3.1 Extensive monetary policy reduces the risk of insolvency of commercial banks

First, the expanded monetary policy increases the value of assets including collateral and income of banks, thus improving the ability of banks to withstand risks, or reduce the risk of loss payment ability of commercial banks

Secondly, reducing interest rates may increase bank profits, thus reducing the risk

of bank insolvency Agur and Demertzis (2012) argue that an expansionary monetary policy may have two effects on bank risk: first, lower interest rates may also reduce the risk of default of borrowers because financial costs decreased and their output increased, secondly, low interest rates could increase the bank's business profits

2.3.2 Extensive monetary policy increases the risk of bank insolvency

The impact of monetary policy instruments increases the risk of bank insolvency through a number of channels as follows:

First, interest rates decline when the central bank enforces an expansionary monetary policy affecting the behavior of depositors, banks have difficulty in mobilizing business capital and risk tolerance reduction

Secondly, with the expansion of monetary policy, banks can loosen lending standards and increase credit for customers at higher risk when monetary policy is lifted and there is a boom about credit risk

Third, reducing interest rates will increase leverage and risk of bank insolvency

2.4 Institutions and the impact of institutional quality on the evil of monetary policy to the risk of bank insolvency

2.4.1 Institutional and institutional quality

* Institution concept

Each country and territory may have different levels of development, but it is operated by direct or indirect dominance of the institution Until now, there has been a wide recognition of the institutional role for the development in general and economic development in particular, but there is no general agreement on institutional arguments and there exist different concepts about institutions

According to the concept of the World Economic Forum (WEF): Institution can be understood as what constitutes an orderly framework for human relations, positioning the enforcement mechanism and the limits of relations between participants interact; is the common will of the social community in establishing order, rules, constraints and norms, shared by everyone Thus, the institution understands in the above sense the principles (irrespective of the form of the principle) in the way of behaving in society, formed from practice in the scope of human relations, socially accept and guide human interaction This can be considered as the most general concept of institutions

Research by Simon Anholt, Dung (2008) suggests that institutions consist of three elements: law, state apparatus, and modality of the country The common institutional value of developed OECD countries (seen as those with the best national brands) is democracy, separation of rights, market economy, international integration These values are sustainable because even in these countries, there have been dozens of socio-economic crises, but they have not only destroyed those sustainable values but also made common values it is getting better and better

According to Douglass North (1993), institutions are constraints that people create

to guide interactions between people Or to put it another way, institutions are "rules of a society." If they do well, they will encourage people to act in a way that produces good results, and vice versa These "rules of the game" include formal institutions (such as laws, ownership, ways of organizing state power) and informal institutions (such as customary and traditional, and standards of social behavior North argued that informal institutions are also important, they have an impact on the success or failure of formal institutions For example, even though many good laws are enacted, if they lack the spirit of supremacy, their effectiveness is not much

*Institutional quality

Schneider (1999) defines public institutional quality as the exercise of authority or control to manage a country's operations and resources There are many criteria for evaluating institutional quality According to World Bank, there are 6 criteria used to assess institutional quality: people's voice and accountability of the government; political

stability; efficiency of government; quality policy enforcement; comply with the law, the rule of law state, the ability to control corruption

An institution is considered high quality if it reduces transaction costs and limited sanctions have been conflicting

2.4.2 The effect of institutional quality on the impact of monetary policy on the risk of insolvency of commercial banks

First, institutional quality plays an important role in transaction costs, which is the cost for information

Secondly, today, formal laws, and clear property rights affect economic activities But even in the most developed economies, formal laws make up only a very small part of the aggregation of constraints that make choices The daily interaction of subjects in the family, in society, in economic transactions, is greatly influenced by moral rules, codes of conduct and custom Informal constraints regulate how individuals handle and use information The thought, ideological, and even religious g roll cage is also an important role in shaping society Institutional quality plays a decisive role in the formation and operation of mechanisms, policies and operating mechanisms and behaviors of actors in the economy, including the effects of monetary policy

2.5 Summary of related studies

First: studies show that monetary policy directly affects the risk of insolvency through profits, cash flow of the bank, including studies of Gambacorta L (2009); Altunbas and ctg (2009); De Nicolo and ctg (2010); as well as Delis & Kouretas (2011); Agur and Demertzis (2011); Delis, Manthos D and Hasan (2012); Paul Gaggl and Maria

T Valderrama (2014); Minghua Chen and the director (2017)

Secondly, another research direction shows that monetary policies directly affect the credit risk of commercial banks and therefore indirectly increase the risk of insolvency

of banks These studies include research by Kashyap and Stein (1995); Jimnez et al (2009); Gambacorta and Marques-Ibanez (2011); Angeloni et al (2015),

Third is the impact of monetary policy on the risk of insolvency of commercial banks may be changed under the influence of other factors such as customers, institutions,

These studies including research by Crowe and Meade (2008 ) ; Bekaert et al (2013) ; Papadamou et al (2014) ; Dincer and Eichenengreen (2014) ; Dell'Ariccia et al (2014) ; Drakos et al (2016)

CHAPTER 3: METHODS AND RESEARCH DATA 3.1 Research Methods

3.1.1 Research process

3.1.2 Develop research hypothesis

Hypothesis H1: expansionary monetary policy can reduce the risk of losing

solvency of the bank

Hypothesis H2: Credit growth may increase the risk of bank insolvency

Hypothesis H3: An increase in the foreign exchange reserve ratio may reduce the

bank's risk of insolvency

Hypothesis H4: An increase in M2 supply growth may reduce the bank's risk of

insolvency

Hypothesis H5: When the level of competition in the banking market increases, the

risk of bank insolvency increases

Hypothesis H6: Diversifying revenue increases will have an impact increases the

risk of losing solvency of the bank

Hypothesis H7: Increased economic growth will have the effect of reducing the

risk of bank insolvency

Hypothesis H8: An increase in the inflation of the economy will increase the risk

of bank insolvency

Hypothesis H9: Good institutional quality will increase the influence of monetary

policy on the risk of bank insolvency

In order to consider the impact of monetary policy on the risk of insolvency of commercial banks in the context of changes in institutional quality and answer to research questions No 2 , study and consider additional internal variables model (2) below:

Riski,t = 𝛽0 + 𝛽1Risk (i, t − 1) + 𝛽2MPt ∗ 𝐼𝑁𝑆𝑡 + 𝛽3CRt+ 𝛽4FXIt +𝛽5INFt +𝛽6LERNER i,t +𝛽7INC𝑖,𝑡 +𝛽8GRO𝑡 + 𝛽9𝑆𝑀𝑡+𝑓𝑖+ εi,t (2)

Description:

Risk (i, t − 1) : Risk of insolvency of commercial banks in year t-1

MPt: The monetary policy of Vietnam in the year t includes: re-interest rate I1) and refinancing interest rate (MP-I2)

(MP-CRt: The rate of credit growth in Vietnam's economy in year t

FXIt: Growth rate of foreign exchange reserves of Vietnam in year t

INFt : Vietnam's inflation rate in year t

GROt : GDP growth rate of Vietnam in year t

INCi,t : Diversify the bank's income in year t

LERNERi,t : The level of competition of commercial banks in year t

SM t : Vietnam's M2 money supply growth year t

INS t : The institutional quality of Vietnam in the year t

𝑓𝑖: fixed elements of bank i in each period of time

εi,t: model error (1)

Describe the variables listed in detail as follows:

Table 3.1: Explaining variables in the model Variable name Symbol Formula calculator / data source Expected sign