Policy Implications for Enhancing the Capital Adequacy Ratio of Commercial Banks Post Covid-19 pandemic in Vietnam

Abstract

The impact of the Covid-19 pandemic made the banking industry in countries in the
region face many difficulties, profits fell, and bad debts increased. Besides, a series of severe
criminal cases nationwide related to banking governance caused thousands of billions of dollars
lost and high bad debts, affecting the banking system's stability. In that context, commercial
banks need to be applied the method of calculating the minimum capital adequacy ratio (CAR)
according to the Basel II calculation formula. The regulations in Basel II and the
implementation and implementation process are mainly aimed at ensuring the goal of ensuring
safety. Thus, the article studied the internal factors affecting the CAR of commercial banks
from 2010 to 2021 from 25 commercial banks during the research period. The research method
applied the generalized system method of moments (SGMM). Research results show that
critical factors affect the CAR coefficient with a significance level of 1.0 percent. The article's
value is to ensure the safety of risky assets. Banks need to maintain a necessary level of equity
as measured by the minimum capital adequacy ratio. Based on the research results, the authors
give policy management to improve the future CAR coefficient.