Estimation of efficiency in Vietnamese commercial Banks before and during Covid-19 crisis

Abstract

Integration and globalization are an inevitable trend for economic development process. These processes have had a huge impact on various economic sectors, including the finance and banking sectors. Moreover, the efficiency has become a global concern in recent year. However, from the beginning of 2020, the COVID-19 pandemic appeared and spread globally at a rapid rate and severely affected the economies of all countries around the world. During this period, all the economic sectors were affected negatively, so does banking industry. The stability of the banking system has been threatened by the consequences of COVID-19 pandemic as the bad debts increased, banks’ revenue decreased and risks of businesses’ bankruptcy. Customers’ deposits have become deficit while the demand for loans have decreased, which affects Vietnamese commercial banks. This study aims to estimate the efficiency of Vietnamese banking system before and during COVID-19 by using Data Envelopment Analysis model to evaluate the impact of COVID-19. Furthermore, this paper applied the Tobit regression for investigating the main determinants influence the banking industry in Vietnam during COVID-19 pandemic. Our findings suggest that technical efficiency, pure technical efficiency and scale efficiency of thirty-one Vietnamese commercial banks dropped sharply when the pandemic appeared. Additionally, this study indicates the days of social distancing in Vietnam have had an impact on the performance of banking system