The Influence of External Factors on Financial Crisis in 2008 in Russia

The purpose of this work is to create a model, which will be able to predict whether the bank will default or not. In order to conduct this model binary choice was used, specifically Logit model. The content of the work, is in the following form: 1. Study of previous researches and figuring out their advantages and disadvantages. 2. Figure out, what methodology will be needed to conduct a research 3. State the hypothesis for model 4. Basing on previous researches, decide on which factors should be included in the model and decide which banks should be included 5. Using the step-by-step procedure, making of final set of coefficients, which will give the most efficient result 6. Testing the model and checking on potential problems that may occur 7. Check whether the hypothesis were satisfied and conclusion There are 14 banks and 11 time periods, from April 2007 until October 2009, and the data is collected each quarter for current period. The bank is assumed to be defaulted, if the bank looses their license due to inability to deal with clients and unavailability of capital and reserves. But the bank is assumed as defaulted at least 2 quarters before actually default occurs, as there might be lag between time when bank liquidity worsens and bank actually defaults. The main financial factors were chosen using CAMELS methodology, while the macroeconomic factors and dummy variables, was chosen basing on the previous researches. To define which coefficients are most efficient in each Factor, by looking at P-value and correlation with other variables. Basing on the research, it was concluded that including macroeconomics factors, dummy variables and size of the bank, improves the predictability power of the model. The final model, was tested by several tests and using robust correction, the model was corrected, and the most efficient financial model was created.