The Stability of the Russian Banking Sector: Results of Stress Tests of Capital Adequacy

Now stress testing is developing intensively and is becoming more common method of risk analysis and forecasting of the stability of the banking system. In this study, stress test of capital adequacy of the Russian banking sector was conducted and it was based on a sample of monthly observations in the period from January 2005 to February 2016. Firstly, regression model of the capital adequacy ratio was built, where the two groups of variables were taken as explanatory variables. The first variables characterize banking activity - share of "doubtful" and "bad" loans in the loan portfolio of the banking system, MIACR rate, the rate of return on assets, the proportion of highly liquid assets in the total assets of the banking system. The second group represents the country's macroeconomic indicators - the value of the industrial production index, the percentage change in the value of the currency basket, the price of oil "Urals", the value of the MICEX index, the volume of foreign exchange reserves. Furthermore, in addition to this, model of the credit risk was constructed. As a result of the construction of models, we identified factors that can have a significant impact on the level of capital adequacy in the Russian banking sector. During the investigation, two stress scenarios have been developed: "serious" stress and "softer". Parameters of these scenarios were chosen as a result of analysis of normative documents of the Central Bank of Russia, Ministry of Economic Development forecasts and other official sources. Based on these results we can conclude that: when applied at the same time stress scenarios to macroeconomic variables, and the variables that characterize the banking risks, it was predicted that the capital adequacy ratio can be reduced to 4.89%, which will require additional capitalization of the banking sector in 2335 billion rubles to meet the minimum ratio.