Financial Stability

The following paper presents a study of the widely applied methodologies for the evaluation of stability of the banking system of the Russian economy. The research employs a sample of 20 key banks with available information over a time period from the beginning of 2012 till the end of 2017. The study focuses on results, generated with the use of three, two most commonly applied and one novel, methods, namely Altman Z-scores, Merton model for Probabilities of Default, and Consistent Information Multivariate Density Optimization, making conclusions on current stability conditions of the economy, as well as examining, how each of the methodologies presents effects of such characteristics of banks, as government participation, foreign participation, or establishment of sanitation procedure onto a financial institute. The study suggests, that the general trend is towards recovery of the system. However, for each individual group of banks, the predictions from each of the methodologies differ. Further into the study, Stability Indexes are employed to show, how the economy’s conditions changed over time.