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Income structure and bank capital: evidence from Vietnam

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  • Van Dan Dang

Abstract

The study examines the impacts of bank income structure captured by income diversification and volatility on capital buffers. Using a dataset of Vietnam during 2008-2017, we find that: 1) income diversification towards non-interest segments reduces capital holdings; 2) revenue volatility is accompanied by a higher level of capitalisation. These results are robust across alternative measures of bank income, and different econometric methodologies based on the generalised method of moments and the standard approach of least squares method in dynamic and static panel models. The findings exhibit the benefits of income diversification and revenue stability in terms of capital savings for banks themselves. In contrast, from the regulatory perspective that favours bank safety and soundness, these findings also suggest some insightful implications for policymakers.

Suggested Citation

  • Van Dan Dang, 2024. "Income structure and bank capital: evidence from Vietnam," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 20(2), pages 146-160.
    • Handle: RePEc:ids:ijepee:v:20:y:2024:i:2:p:146-160
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