Liquidity-Related Macroprudential Instruments and Bank Performance: Evidence from Vietnamese Commercial Banks (Journal of Economic and Banking Studies)

Summary

• The study uses quarterly data for 27 Vietnamese commercial banks from Q3 2014 to Q4 2024.p.4
• A tighter liquidity-related macroprudential stance is associated with higher bank stability (Z-score) but lower profitability (ROA).p.4
• In the fixed-effects models the MPliq coefficient is -0.0761 for ROA and 0.3282 for the Z-score.p.12
• In the two-way fixed-effects models the MPliq coefficient is -0.0488 for ROA and 0.1860 for the Z-score.p.12
• The System GMM robustness check gives an MPliq coefficient of -0.0451 for ROA and 0.1635 for the Z-score.p.13
• Data cover only 27 of the 35 Vietnamese banks because some are undergoing restructuring and do not publish information.p.15

Key insights

1. The policy index is cumulative, coding +1 for tightening and -1 for loosening measures affecting LDR, LCR and SFML.p.8
2. The findings point to a profitability-stability trade-off in the use of liquidity-related macroprudential instruments.p.4
3. Non-interest income is positively associated with ROA (β = 0.1164) and with the Z-score.p.11
4. GDP growth is positively and significantly associated with both profitability and stability (β = 0.0494 for ROA in the fixed-effects model).p.11
5. The lagged Z-score is positive and significant (β = 0.43), suggesting substantial persistence in bank stability.p.14
6. Stronger liquidity requirements may constrain maturity transformation and credit expansion and raise the opportunity cost of holding liquid assets.p.15