The influence of non-interest income on bank risk during the COVID-19 pandemic: Implications for governance in a developing market
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Minh Phuong Nguyen 
, Anh Phan , Thu Thuy Nguyen, Yen Nhi Ngo, Thi Hanh Duyen Nguyen, Van Hieu Pham
This work is licensed under a Creative Commons Attribution 4.0 International License.
Abstract
This study aims to assess the impact of non-interest income on the risk profiles of Vietnamese commercial banks. By employing the generalized method of moments (GMM) estimator, using panel data from 24 banks in Vietnam, spanning from 2010 to 2022, the research identifies a positive correlation between non-interest income and bank risk, as reflected in the Z-index score. The findings reveal a significant disparity between banks that adhere to Basel II standards and those that do not, with Basel II-compliant banks demonstrating a stronger capacity to manage associated risks. This paper contributes to the literature by exploring the risks of two groups of commercial banks that meet/do not meet Basel II standards, especially in an emerging country as Vietnam, where adherence to Basel is not comprehensive. The study highlights key policy implications for regulators and banks in Vietnam, stressing the need to balance the benefits of non-interest income with its risks. The research calls for better regulatory compliance, especially in risk management, and urges Vietnamese regulators to enhance the framework for banks not yet compliant with Basel II. Collaboration between policymakers and bank executives is essential to maintaining financial stability as banks diversify their income sources.
Keywords: COVID-19, Non-Interest Income, Bank Risk, Commercial Banks, Basel
Authors’ individual contribution: Conceptualization — M.P.N.; Methodology — A.P.; Validation — T.H.D.N.; Writing — Original Draft — Y.N.N.; Writing — Review & Editing — T.T.N. and V.H.P.
Declaration of conflicting interests: The Authors declare that there is no conflict of interest.
JEL Classification: C4, D8, G21
Received: 23.12.2024
Revised: 27.03.2025; 07.09.2025
Accepted: 02.10.2025
Published online: 06.10.2025
How to cite this paper: Nguyen, M. P., Phan, A., Nguyen, T. T., Ngo, Y. N., Nguyen, T. H. D., & Pham, V. H. (2025). The influence of non-interest income on bank risk during the COVID-19 pandemic: Implications for governance in a developing market. Journal of Governance & Regulation, 14(4), 75–83. https://doi.org/10.22495/jgrv14i4art7
