A research on market discipline effects of the banking system in Vietnam

Abstract

Using the panel data in 2003 – 2010 of 21 Vietnamese Commercial banks, this paper examines the relationship between deposit interest rates and banks’ risks as well as the relationship between annual deposit growth and the risks, in order to reflect market discipline of Vietnamese Banking in the same period. Results show that the market discipline exists but in a weak degree, the above-mentioned relationships are unclear. Furthermore, through the analysis of market discipline depending on banking classification (state-owned commercial banks, joint-stock commercial banks), the author makes it clearer to find out causes of these phenomena. Finally, the author suggests some solutions to enhance effects of market discipline - a component of the Vietnamese banks’ financial supervision system