Abstract
This study examines the development of a risk management framework within Vietnam’s commercial banking system, aligned with Basel II principles, with a focus on the Capital Adequacy Ratio (CAR), supervisory processes, and market discipline. CAR, a critical measure of a bank's capacity to absorb financial shocks and maintain stability, is mandated to be at least 8% or 9% depending on regulatory guidelines. Using both bank-specific determinants and macroeconomic variables, this study investigates the factors influencing CAR in Vietnamese commercial banks. The results reveal that bank size, return on assets (ROA), loan loss reserves, inflation, and policy interest rates negatively impact CAR, whereas financial leverage and credit ratios exhibit a positive correlation. To ensure banking stability and sustainability, the study recommends enhancing internal controls, aligning operational strategies with regulatory requirements, and adapting to evolving macroeconomic conditions.
