Deposit Interest Rates as a Predictor of Bank Default: the Case of Russia

Student: Bondarenko Mariia

Educational Programme: Economics (Bachelor)

Final Grade: 8

Year of Graduation: 2017

Using a database from Russian banks (for the period from 2 quarter 2015 to 4 quarter 2016), the authors analyze the relation between bank’s failure probability and the interest rates that are offered by such banks on deposits of different maturities (up to 90 days, from 90 to 180 days, from 180 days to a year and over a year). As a result, it was shown that overstating of deposit interest rate positively influence on the bank’s failure probability, and this demonstrates that there is a pricing form of market discipline on Russian market of bank deposits. Moreover, the effects of control variables are the same as in previous papers on this issue: large bank with high capitalization and profitability rates as well as significant level of banking activity has less probability of default.

Full text (added May 9, 2017)

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