Impact of Technology and Financial Innovation on Systemic Risk of Commercial Banks in Vietnam
Keywords:
Systemic risk, financial innovation, regulatory framework, Creative innovation, digital transformation, business efficiency, banking sectorAbstract
Background: Vietnam's commercial banking sector is undergoing a profound transformation due to globalisation, digital innovation, and macroeconomic volatility. These shifts have heightened concerns over systemic risk, particularly in emerging markets where regulatory frameworks and internal governance structures are evolving.
Objective: This study examines the determinants of systemic risk in Vietnamese commercial banks, specifically isolating and assessing the differential impact of the macroeconomic environment, financial integration, regulatory factors, and internal bank characteristics, with a primary focus on the mediating roles of technology and financial innovation.
Methodology: The authors employed structural equation modelling on data from 450 bank managers across six major cities, assessing the direct and indirect effects of five key factors on systemic risk. Confirmatory factor analysis and Bootstrap techniques were applied to ensure model robustness.
Result: Technology and financial innovation have a positive impact on systemic risk, while legal frameworks and supervisory authorities significantly mitigate it. Internal governance, globalisation, and macroeconomic conditions also contribute, albeit to a lesser extent.
Conclusion: Robust regulatory oversight and governance structures are crucial for mitigating the risks associated with digital transformation. Internal banking capabilities and macroeconomic stability provide foundational support but are secondary to external regulatory and technological drivers.
Unique Contribution: This study offers a novel integration of technological innovation, governance, and macro-financial factors into a unified systemic risk model. It offers novel empirical insights for emerging economies, informing regulatory design by balancing digital transformation with financial stability in under-researched, rapidly evolving financial systems.
Key Recommendation: Policymakers and SME managers should strategically prioritise resource allocation and development strategies aimed at improving the workforce.
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