The impact of Basel standards on banks' lending activities: An empirical evidence from Vietnam in the beginning

Abstract

This study aims to analyze how lending ability would be affected following the implementation of Basel's standards in Vietnamese commercial banks. I have selected panel data from first quarter 2011 to third quarter 2014 in Vietnam banking industry - the period of regulatory applied for this study and I find that beside the change of own capital which would have impact on lending capability at time of capital change, lending capability would also be directly influenced by borrowings from other banks and deposits of customers. Using multi - regression, LMG, DEA method and Granger - Cause test, I find that banks who fund their lending with less dependence on interbank capital are more efficient and could do business better than those who fund their lending mostly by interbank capital. Furthermore, almost elements that fund for the lending do not support for the improvement of banks' capital.