Non-Performing Loans: Affecting Factor for the Sustainability of Vietnam Commercial Banks

Abstract

Non-performing loans are becoming the main factor influencing the sustainability of Vietnam’s financial system. In order to enforce the financial system in general and the banking system in particular, this study aims to examine the determinants of Non-performing Loans (NPLs) in the Vietnamese banking system. Particularly, four factors, including the lag of NPLs in the last year, Loans-to-Asset ratio, Total asset and the Dummy (state-owned or not) were observed and estimated by quantitative method Ordinary Least Square in order to declare the relationship between them and the rate of changes in NPLs. The results showed that the four factors (Growth rate of Loans, Total Assets of Banks, NPLs in the last year and the Dummy variable) actually helped the growth of NPLs in recent years. Further, some implications to the bank management are withdrawn.