Non-performing loans: Affecting factor for the sustainability of Vietnam commercial banks. Non-performing loans are becoming the main factor influencing the sustainability of Vietnam’s financial system. In order to enforce the financial system in general and the banking system in particular, this study aims to examine the determinants of Non-performing Loans (NPLs) in the Vietnamese banking system. | Journal of Economics and Development, , , April 2015, pp. 93-106 ISSN 1859 0020 Non-Performing Loans: Affecting Factor for the Sustainability of Vietnam Commercial Banks Nguyen Thi Minh Hue National Economics University, Vietnam Email: huenm@ Abstract Non-performing loans are becoming the main factor influencing the sustainability of Vietnam’s financial system. In order to enforce the financial system in general and the banking system in particular, this study aims to examine the determinants of Non-performing Loans (NPLs) in the Vietnamese banking system. Particularly, four factors, including the lag of NPLs in the last year, Loans-to-Asset ratio, Total asset and the Dummy (state-owned or not) were observed and estimated by quantitative method Ordinary Least Square in order to declare the relationship between them and the rate of changes in NPLs. The results showed that the four factors (Growth rate of Loans, Total Assets of Banks, NPLs in the last year and the Dummy variable) actually helped the growth of NPLs in recent years. Further, some implications to the bank management are withdrawn. Keywords: Bank-level factors; macro factors; Non-performing loans (NPLs); Vietnamese commercial banks, Journal of Economics and Development 93 Vol. 17, , April 2015 1. Introduction To start with, Sanjeev (2007) constructed a model in order to derive which factors affect the changes in the number of NPLs in the Indian banking system. In order to clarify the relationship between the independent determinants and NPLs, he used primary data collected from structured questionnaires to the managers of the 37 Indian commercial banks. Hence, Sanjeev used Hypothesis testing – the Z test with a 99% significant level of one tail to test the effects of endogenous and exogenous factors on the changes in the number of NPLs. The result showed that the exogenous factors made more of a contribution to the changes in NPLs than the endogenous factors. .
