Influence of the Key Interest Rate on Interest-Rate Risk of Banks

Student: Zavodchikova Kseniia

Educational Programme: Economics (Bachelor)

Final Grade: 7

Year of Graduation: 2016

This paper investigates the influence of the key interest rate of Central Bank of Russia on interest-rate risk which banks face in Russia. Using sample of all Russian banks from January 2004 to December 2015, we developed 3 types of regression model: pooled regression (PR), random effect model (REM) and fixed effect model (FEM). Here the dependent variable or interest- rate risk was GAP-ratio and the regressors were key interest rate, individual characteristics of banks and different macroeconomic factors. These models took the same results. They indicated that the more key interest rate the higher interest-rate risk of banks. Moreover, size of banks, liquidity level, capitalization, exchange rate also influence on this type of banking risks. Both credit organizations creating risk-management programs and Central Bank of Russia pursuing monetary policy should take into account our results.

Full text (added May 9, 2016)

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