Open AccessDeposit Insurance and Bank Risks in Vietnam
Author(s) -
Pham Thi,
Dao Thanh Binh
Publication year - 2016
Publication title -
business and economic research
Language(s) - English
Resource type - Journals
ISSN - 2162-4860
DOI - 10.5296/ber.v10i2.16750
Subject(s) - deposit insurance , leverage (statistics) , business , vietnamese , actuarial science , fixed deposit , credit risk , incentive , certificate of deposit , financial system , economics , linguistics , philosophy , microeconomics , machine learning , computer science
The relationship between deposit insurance and banking risks has been widely studied, but has been the subject of relatively few empirical studies, especially for Vietnamese banking system. This research aims to explore the effect of deposit insurance on banks’ risk taking in Vietnam. The paper employs 7 bank specific variables and 2 macroeconomic variables, as well the premium paid by banks as variables for the regression models used. The results suggest that deposit insurance does impact banks’ risk taking incentive but it has different effects on each type of risk. It is concluded that credit, default and leverage risk are found to have a negative relationship with deposit insurance, while leverage and deposit insurance have a positive relationship, which may help banks and supervisors in their decision for the deposit risk premium. This paper contributes to the existing literature by help to understand the impact of deposit insurance on banks risk taking behavior in Vietnamese banks.