Identifying domestic systemically important banks in Vietnam: Framework design and empirical assessment using audited financial data

Abstract

 This paper develops and applies a customized indicator-based framework to identify Domestic Systemically Important Banks (D-SIBs) in Vietnam over the period 2015-2024. Drawing on the Basel Committee on Banking Supervision (BCBS) guidance and a review of international regulatory practice across the advanced and selected emerging markets, the paper proposes a five-dimension framework - encompassing size, interconnectedness, substitutability, complexity, and domestic sentiment - adapted to Vietnam’s bank-dominated, retail-funded financial system. Each indicator is computed as a bank’s share of the system-wide total, and the five dimension scores are combined using equal weights to form a composite D-SIB score. The sample is restricted to commercial banks with clean audited financial statements. Empirical results confirm the stable dominance of four state-owned banks throughout the sample. The audit-based exclusion of SCB from 2021 proved empirically prescient given its 2022 collapse. A comparison with the State Bank of Vietnam’s official 2024 D-SIB list reveals a ranking discrepancy between TPB and MSB, suggesting the regulator’s methodology relies primarily on asset size rather than a multidimensional assessment. The paper argues for a more transparent, rule-based D-SIB approach consistent with international best practice.