STRESS TESTING THE LIABILITY RISK RESISTANCE OF COMMERCIAL BANKS IN VIETNAM

Abstract

The study was conducted with the objective of supplementing empirical
evidence to test the liquidity risk tolerance of some Vietnamese banks in the face
of potentially adverse, exceptional, and unusual events. like the Covid-19
pandemic. In this paper, the author examines the liquidity risk tolerance of banks
based on the model of Martin Cihak. This method is based on data about a bank's
assets at a point in time, making the assumption that a liquidity shock is a spike
in the withdrawal rate in deposit accounts. The data are collected from the
financial statements of 10 Vietnamese commercial banks as of June 30, 2021.
The study shows that the banks have a liquidity surplus and exceed the shocks in
the base scenario without need to sell illiquid assets or get help from the State
Bank. But when the market is unfavorable and stressful, some banks have to face
large capital outflows leading to liquidity loss.