Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/222683
Authors: 
Nguyet Thi Minh Phi
Hanh Thi Hong Hoang
Taghizadeh-Hesary, Farhad
Yoshino, Naoyuki
Year of Publication: 
2019
Series/Report no.: 
ADBI Working Paper Series 916
Abstract: 
In recent years, the Vietnamese economy has shown signs of financial distress, and especially small banks have experienced serious liquidity and solvency problems. Based on the new policy of the State Bank of Vietnam, in order to ensure safe and effective banking operations, the Basel II accord will be widely applied to the whole banking system by 2018. This paper investigates the effects of the Basel II capital requirement implementation in Viet Nam on the bank lending rate and national output. The paper provides a theoretical framework as well as empirical model by developing a Vector Error Correction Model (VECM) over the period 2018 to 2016 by employing three groups of indicators (macroeconomics, banking, and monetary). The main finding of the paper is that at the bank level, a tightening of regulatory capital requirements does not induce a higher lending rate in the long run. Also, changes in micro-prudential capital requirements on banks have statistically significant spillovers on the GDP growth rate in the short term; yet, their effects significantly lessen over a longer period.
Subjects: 
Basel II
regulatory capital requirements
bank capital
lending rate
aggregate growth
JEL: 
G21
G28
Creative Commons License: 
https://creativecommons.org/licenses/by-nc-nd/3.0/igo/
Document Type: 
Working Paper

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