TAILIEUCHUNG - The Determinants of Capital Adequacy Ratio: The Case of the Vietnamese Banking System in the Period 2011-2015
The analysis of a data set of observations for Vietnamese banks in the period 2011-2015 shows how the Capital Adequacy Ratio (CAR) is influenced by selected factors, namely: asset of the bank SIZE, loans in total assets LOA, leverage LEV, net interest margin NIM, loans lost reserve LLR, Cash and Precious Metals in total assets LIQ. Results indicate, based on data, that NIM and LIQ have significant effect on CAR. On the other hand, SIZE and LEV do not appear to have significant effect on CAR. Variables NIM, LIQ have positive effect on CAR, while variables LLR and LOA are negatively related with CAR. | VNU Journal of Science: Economics and Business, Vol. 33, No. 2 (2017) 49-58 The Determinants of Capital Adequacy Ratio: The Case of the Vietnamese Banking System in the Period 2011-2015 Pham Thi Xuan Thoa*, Nguyen Ngoc Anh VNU University of Economics and Business, 144 Xuan Thuy Str., Cau Giay Dist., Hanoi, Vietnam Received 26 October 2016 Revised 09 June 2017, Accepted 26 June 2017 Abstract: The analysis of a data set of observations for Vietnamese banks in the period 2011-2015 shows how the Capital Adequacy Ratio (CAR) is influenced by selected factors, namely: asset of the bank SIZE, loans in total assets LOA, leverage LEV, net interest margin NIM, loans lost reserve LLR, Cash and Precious Metals in total assets LIQ. Results indicate, based on data, that NIM and LIQ have significant effect on CAR. On the other hand, SIZE and LEV do not appear to have significant effect on CAR. Variables NIM, LIQ have positive effect on CAR, while variables LLR and LOA are negatively related with CAR. Keywords: Capital adequacy ratio (CAR), Vietnamese banks, Basel, NIM, LIQ. 1. Introduction * and CAR (Capital Adequacy Ratio) in Basel records. It’s said that the study of the CAR ratio in commercial banks is very necessary. In recent years, Vietnam has witnessed the development and completion of its banking system. However, the increase in terms size and diversity leads to high risk directly affecting the safety of the system. To prevent the collapse of banks and protect depositors, Vietnamese banking executives are interested in the importance of capital adequacy ratio (CAR) based on Basel standards. This is one of important indicators for the continuing safety in commercial banks. If a bank could guarantee CAR, that means it has a concrete cushion against financial shocks, protecting both themselves and depositors. Therefore, a rising question for bank executives is how to improve CAR. To answer this question, first of all, we need to determine the factors that influence CAR in
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