Macroprudential policy and non-performing loans: Empirical evidence from commercial banks listing in Vietnam

Abstract

This study examines the dynamic relationship between macroprudential policy actions and the non-performing loan (NPL) ratio of 19 listed commercial banks in Vietnam over the 2017-2023 period. The analysis employs a balanced quarterly panel dataset and the panel local projection method, with a maximum horizon of five quarters. Macroprudential policy is measured using the aggregate macroprudential policy (MaPP) index and four instrument categories - capital requirements (CAP), loan-to-deposit ratio (LTD), liquidity requirements (LIQ), and loan restrictions (LoanR) - obtained from the International Monetary Fund (IMF)’s integrated macroprudential policy (iMaPP) database. The results show that MaPP is associated with a lower non-performing loan ratio during the first three quarters, but the relationship is no longer statistically significant in the fourth quarter. CAP exhibits a negative association with a lag of three to five quarters. LTD has negative coefficients over the first three quarters; however, this result is identified from only one easing quarter and no tightening events. The coefficient on LIQ shifts from negative in the first quarter to positive in the third and fourth quarters, whereas LoanR has positive coefficients at all horizons.