Modelling of Probability of Default in Russian Banking

Russian banking industry has undergone the withdrawal of large number of licenses and bank failures recently. Hence, the issue of bank default is of current interest. In this paper the existing literature on the topic is summarised in order to employ the up-to-date logit model, which provides the most accurate forecast of bank failure. The model was developed using the statistics from 2010 to 2017 on a created subsample and quality of predictions was tested on the whole sample. Bank’s size, ownership structure and performance (represented by profitability, asset management and economic activity) are the main internal factors to be considered. In addition to these, some indicators of macroeconomic conditions and institutional environment were analysed. The estimation output could be useful for bank’s management and its creditors when assessing potential risks.