Application of the Z-score Model in the Financial Stability Evaluation of Commercial Banks

Student: Akhmenskaia Daria

Educational Programme: Finance (Master)

Year of Graduation: 2017

The effective productivity and reliability of banks in each country are the most important factors that contribute to the economic growth. And financial stability is an important parameter in the banking industry. In this work, we evaluated the effect of banking and macroeconomic indicators on the financial stability of Russian banks using the model z-score. For this purpose, we selected 50 Russian commercial banks by assets and indicators affecting soundness. As a result, it was found that the share of overdue debt exerts the greatest influence - an increase in the factor by one leads to bank stability reduction by 80%, and the smallest - the logarithm of assets - an increase of 1% reduces the z-score by 0.54%. As for macroeconomic variables, we determined that the inflation (negative impact) and the real GDP growth rate were significant in the model. The second indicator had a positive effect on the financial stability of credit institutions.

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