Participation in Deposit Insurance Payments as an Element of Banks' Growth Strategy

One of current trends is take away of commercial banks licences. Payout of insurance to their depositors might be the element of growth strategy, since it allows to increase the volume of assets and customer loyalty. The aim of this paper is to analyze the insurance payout participation as an element of bank growth strategy. Tasks set to realize the goal are: analyze the literature in the sphere of bank growth strategies and deposit insurance systems, analyze Russian banking industry and possible growth strategies for Russian banks, analyze the insurance pauout participation as element of groeth strategy for Russian commercial banks and find associacion between participation in this activity and the pace of stock prices growth. To achieve this goal 2 hypothesis were formulated 1) in the short run announcement of bank-agents increases their stock prices 2) in the long run the pace of growth of balks participating in deposit insurance payuouts is higher than of those which do not. The tasks set were realized on the basis of Russian banking industry analysis and tests on these hypothesis by econometric methods. Industry analysis was conducted on the basis of interviews with banking industry experts, while econometric analysis on the basis of data on stock prices and announcements of banks-agents and the volumes of payout. The result of industry analysis is as follows: in the current conditions the majority of methods to realize growth strategy either have low potential or are efficient only in the short run, while participation in deposit insurance payouts not only alow to increase the amount of banks assets but also increases the customer loyalty and the length of relationships with them, and thus creates the capitalization growth potential. The empirical study gives evidence in support of both hypotheses. So, deposit insurance payout participation might be considered as the element of growth strategy for commercial banks.