Estimation of the Probability of the Bank's Licence Revocation

Student: Starikov Sergey

Faculty: International College of Economics and Finance

Educational Programme: Double degree programme in Economics of the NRU HSE and the University of London (Bachelor)

Year of Graduation: 2018

This paper is aimed at the prediction of the revocation of the bank’s license, or the default of the bank, based on the logistic regression model. The results of the research showed, that there is a dependency between the mandatory banking standards, set and defined by the Central Bank of Russia, and the probability of bank’s default. The main factors determining the probability are capital sufficiency of the bank, long-term liquidity, value of large credit risks, aggregate value of insider-specific risk and use of the bank’s equity for the acquisition of shares of other legal entities. The model was produced and tested on 767 Russian banks for the period 2012-2017. Finally, predictions for the future were stated using the obtained model regarding the possible bankrupts.

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