How Basel Capital Regulations Influence Bank Efficiency in Emerging Economies : A Case Study of the Vietnamese Banking System

This study examines the influence of Basel II capital regulations on the performance of Vietnamese banks between 2011 and 2019. Intermediation and operational efficiency scores are computed using Data Envelopment Analysis (DEA), and a two-period two-group difference-in-differences (DiD) framework is employed to assess the impact of Basel II capital regulations on the efficiency of a subset of banks. The findings indicate a positive and statistically significant increase in the average intermediation efficiency of banks which have adopted the new standards. To validate the DiD results, we conduct a series of placebo intervention tests on the pre-regulation sample and review the descriptive statistics of the treatment and control samples. The results indicate that treatment and control groups have comparable support (positivity), that the assumption of parallel trends is not violated, and that there are no pre-treatment effects on the policy’s impact on the intermediation efficiency of treatment banks. The vast majority of our findings suggest that the implementation of Basel II capital regulations in Vietnam had a positive and economically significant impact on the intermediation efficiency of treatment banks