Capital Adequacy Ratio of Commercial Banks in Vietnam and Some Asian Countries in the Period from 2016 to 2022

During the 1970s of the 20th century, banks expanded their lending activities without a corresponding increase in bank capital. Koehn & Santomero (1980) pointed out that the consequences of excessive lending expansion without a simultaneous increase in bank capital led to the international debt crisis and the failure of one of the largest banks in the United States, Franklin National Bank. A series of control measures and criteria for capital management methods were introduced to prevent the collapse risk of banks. Thus, prior to bank capital regulations, the Basel Capital Accord (1988), originating from the practice of bank operations management, demonstrated the importance of bank capital safety as follows:

Regulations regarding bank capital and capital adequacy originate from the requirement to ensure a bank’s ability to meet its payment obligations for the purpose of protecting depositors and limiting the risk of insolvency in banking operations. Research into the Capital Adequacy Ratio (CAR) of commercial banks in a developing country like Vietnam is necessary, especially when compared to some countries in the Asian region to assess and rank the safety of sustainable development of Vietnamese commercial banks. Therefore, the authors will conduct a comprehensive analysis and comparison of the CAR of Vietnamese commercial banks and certain Asian countries during the period between 2016 to 2022.

Keywords: CAR, Commercial Banks Capital Structure