Policy recommendations for controlling credit risks in commercial banks after the Covid-19 pandemic in Vietnam

Abstract

Credit activities are an essential commercial bank activity. Therefore, preventing and limiting credit risks is vital for their credit activities. The Covid-19 epidemic is still ongoing. In 2021, 30 banks listed bad debts of more than 113 trillion VND, a 26% increase relative to 2020. Vietnam has the dual goal of fighting the outbreak while continuing with socio-economic development. In this context, credit activities are still essential. Banks require the necessary and appropriate management solutions to adapt to the new situation to ensure safe and sustainable credit activities. This study analyzes some current problems and leading causes of the credit risk of commercial banks. The author has primary data from detailed questionnaires distributed directly to 300 credit risk managers based on a random process. This study examines the descriptive statistics, and compares, analyzes, and synthesizes the statistical reports of commercial banks. The study is novel in that it analyzes more than 60% of commercial banks affected by Covid-19 in terms of risks from subjectivity and risks due to objective causes. Therefore, the results suggest several policy recommendations for minimizing Vietnamese commercial banks’ credit risks after the Covid-19 pandemic.

Keywords:

• Credit
• risk
• commercial
• bank
• pandemic
• controlling
• Covid-19

PUBLIC INTEREST STATEMENT

Credit risk management is essential in ensuring the bank’s credit activities’ safety and contributes to minimizing banking activities’ risks. Therefore, the prevention and limitation of credit risks are vital for the credit activities of commercial banks. Besides, credit is the lifeblood of the economic development of a country and is one of the critical conditions promoting the economic development of any country. Moreover, the Covid-19 epidemic has seriously affected the world, leading to a decline in the socio-economic situation. In the context of both anti-epidemic and production, while ensuring safety, the difficulties of enterprises will undoubtedly lead to banks’ problems. Vietnam has been implementing the dual goal of fighting the outbreak while striving to fulfill socio-economic development goals. In this context, credit activities are still essential. Banks need to have necessary and appropriate management solutions to adapt to the new situation for safe and sustainable credit activities.

Data availability statement

The data presented in this study are available in this paper and data surveyed by the author.

Acknowledgements

The author would like to thank everyone for working at small and medium enterprises that contributed to improving the surveying conditions, and making their data publicly available. The author would like to thank the Rector of the University of Finance - Marketing (UFM).

Disclosure statement

No potential conflict of interest was reported by the author(s).

Author contributions

The author performed conceptualization, methodology, validation, formal analysis, investigation, resources, data curation, original draft preparation, review writing, and editing and agreed to the published version of the manuscript.

Additional information

Funding

This work was supported by the University of Finance - Marketing (UFM), Vietnam.

Notes on contributors

Nga Phan Thi Hang

Phan Thi Hang Nga is an Associate Professor, Dean of Science Management Department, University of Finance - Marketing (UFM), Vietnam. I graduated Doctor in Finance and Banking from the Banking University of Ho Chi Minh City. Now, I am teaching banking and financial subjects. Besides, I have successfully published many international papers on credit risk management. I also serve as a reviewer for several accredited and highly ranked international journals. These are topics of interest to managers and researchers. In addition, I also guide Ph.D. students and trainees to explore issues in banking and finance for credit risk. I have carried out many projects at ministerial and provincial levels, contributing to the adjustment of economic policies for Vietnam. Published books for specialized training in banking. In the coming time, I will focus more intensely on improving the competitiveness of digital banks in the digital economy era in Vietnam.