Determinants of risk in real estate lending of Vietnamese commercial banks

This study examines the determinants of credit risk in real estate lending among Vietnamese commercial banks. Panel data representing the banking system is employed, with the non-performing loan (NPL) ratio used as the dependent variable. Independent variables include the loan-to-value (LTV) ratio, lending interest rate, GDP growth, and real estate price growth. Three econometric approaches are applied, namely the Fixed Effects Model (FEM), Random Effects Model (REM), and the Generalized Method of Moments (GMM), in order to address endogeneity, autocorrelation and heteroskedasticity issues. The empirical results reveal that both the LTV ratio and lending interest rate have a positive and statistically significant impact on credit risk, whereas GDP growth reduces credit risk. The findings provide important implications for credit risk management and macroprudential policy design in Vietnam’s banking sector.