Holdings of sovereign bonds by commercial banks in Vietnam

Abstract

The study examines the bank-specific determinants of sovereign bond holdings and how such holdings affect bank lending of the banking market in Vietnam. Using annual financial data of commercial banks from 2007 to 2018 and alternative regression techniques for both dynamic and static models, we attribute the motives of sovereign bond holdings to the liquidity reserves, profitability improvement, and riskshifting. At odds with our expectation, we find no evidence in favor that Vietnamese banks purchase government bonds to increase capital adequacy ratio. Furthermore, to clarify the economic impact of sovereign bond investment, we also offer evidence to reject the notion that purchases of government bonds are detrimental to banks' core function in normal times captured by bank lending and liquidity creation. All estimates are robust across alternative regression techniques in both dynamic and static panel models. Overall, our findings have important policy implications for Vietnam and some emerging economies with similar backgrounds.

Tác động của tính bất định đến việc nắm giữ chứng khoán của các ngân hàng thương mại Việt Nam

“…Trong giai đoạn này, các NHTM đã nhanh chóng tăng cường nắm giữ chứng khoán, qua đó trở thành thành viên chủ chốt của thị trường chứng khoán. Tuy nhiên, các khoản nắm giữ chứng khoán này (chủ yếu là trái phiếu Chính phủ) đã bị hạn chế bởi các quy định của ngân hàng trong những năm gần đây (Dang & Huynh, 2020). Về nguyên tắc, thực hiện tìm kiếm lại tính bất định trong một nền kinh tế mới nổi cũng được hưởng một số lợi thế.…”

Banking uncertainty and lending: does bank competition matter?

“…The state controls the Vietnamese banking sector, favoring political objectives instead of pure commercial decisions. Besides, there was enormous negative volatility in banking in recent years caused by booming bad debts, global financial crisis and various banking reforms (Dang and Huynh, 2020). All of these factors evoked and changed the uncertain environment in Vietnam.…”

Monetary stimulus and bank liquidity hoarding in an emerging market

“…In addition to the features of the monetary policy framework, the role and the change of the banking system also make analysis using the Vietnamese context more relevant. Banking activities have been considered the core interest of the economy when Vietnam's capital market is rated as underdeveloped (Dang & Huynh, 2020). This fact could make monetary policy transmission through the banking system even more pronounced.…”