The impact of monetary policy and economic policy uncertainty on bank performance: The moderating role of business model

Abstract

This research article analyzes the relationship between monetary policy, economic policy uncertainty, and emphasizes the important role of the business model on the effectiveness of commercial banks performance. Using dataset from 27 commercial banks in Vietnam from 2012 to 2021, the study illustrates the response of bank performance when monetary policy changes, specifically when the policy interest rate increases, net interest margins increase but other indicators such as loan loss reserves and non-performing loans increase, and financial stability decreases. A novel factor in this study is the business model of the bank that reduces the impact of monetary policy and economic policy uncertainty on the effectiveness of commercial bank performance. Based on the results obtained, the study contributes evidence and recommends that commercial banks increase their non-interest income to reduce risks during the period when the economy is facing the aftermath of the Covid-19 pandemic. The main findings of this study provided the moderating role of the business model in the impact of monetary policy and economic policy uncertainty on bank performance.