The Influence of State Mortgage Program Participation on Russian Banks' Credit Risk and Profitability

This study analyzes the influence of state mortgage program participation on Russian banks’ credit risk and profitability with the use of regression analysis. Using a comprehensive database provided by the Ministry of Finance of the Russian Federation it’s shown in the paper that there is a negative connection between the performance of Russian banks and the amount of money lent under the state-run program conducted during 2015 – 2017. In particular, the growth of the subsidized loans issued caused the increase of credit risks and the fall of profitability. However, this effect depended on the size and the legal status of the Russian banks: e.g. the participation in the program increased the credit risks of only small and medium private banks while diminished their profitability sufficiently larger in comparison with huge state banks. It is anticipated that the results of the study may be useful for public agents engaged in the development of state mortgage programs. Since the paper tries to shed light on the matters that are not fully investigated in the scientific literature it may also be attractive for the academic community. Keywords: state mortgage program, interest rate subsidies, credit risk, profitability.