Macroprudential analysis for Vietnam’s banking sector in 2015 - An application of stress testing

Abstract

This research evaluated the vulnerability of Vietnam’s banking sector to possible unfavourable shocks in 2015. By applying a solvency stress test, the authors constructed a framework to analyze Vietnamese banks under two different scenarios. The first scenario was based on 1% ‘tail’ events from a VAR model for macroeconomic variables like GDP growth, inflation, lending rates and nominal VND/USD exchange rate, and an ARIMA model for VN-Index. The second scenario choosed extreme episodes of the economy between 1996Q1 and 2014Q4. After designing these two scenarios, the authors estimated the capital adequacy ratio (CAR) for selected banks, and the refinancing cost for the whole sector at about 1.50-2.97% GDP in 2015. The paper proceeds as follows: section