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The Effect of Capital Buffer on Bank Risk-Taking in Vietnam Using Quantile Regression

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  • My Tu Thi Le
  • Phuong Anh Nguyen

Abstract

This study aims to elucidate the nonlinear and heterogeneous relationship between capital buffers and risk-taking in Vietnamese commercial banks. Using quantile regression to analyze data from 25 commercial banks in Vietnam from 2008 to 2022, we found a significant relationship between capital buffers and risk-taking in the banking system. Specifically, capital buffers influence risk-taking in a U-shaped pattern, with stronger effects observed in the upper tail of the risk-taking distribution. Moreover, the turning point of the capital buffer decreases across risk-taking quantiles. These findings indicate that increasing capital buffers, regardless of new capital requirements, does not consistently reduce risk-taking. Notably, high-risk banks exhibit increased risk-taking as capital buffers grow beyond the turning point.

Suggested Citation

  • My Tu Thi Le & Phuong Anh Nguyen, 2025. "The Effect of Capital Buffer on Bank Risk-Taking in Vietnam Using Quantile Regression," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 17(7), pages 1-74, July.
    • Handle: RePEc:ibn:ijefaa:v:17:y:2025:i:7:p:74
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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