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Risk Management in the Banking Sector

Student: Borshchikov Beslan

Supervisor: Viktor Kimovich Shpringel

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: 2019

The purpose of this paper is to analyze banking risks and their impact on the performance of banking sector in Russian Federation for the period 2014 to 2018. Banks, in varying degrees, are subject to different risks because of their activities, which often causes irreparable damage to the financial stability of banks. Credit, liquid, market, operational, capital are the main risks to which the bank is exposed. Using the “Review of the Banking Sector of the Russian Federation” reports published by the Central Bank of the Russian Federation every month, we constructed a regression model and analyzed the relationship between bank efficiency and the level of banking risks. Our main hypothesis is that banking risks directly affect the efficiency of banks. Based on the results of built mathematical model, we will determine the key indicators of the impact on the stability of the banking sector. Banking sector performance was measured using return on assets (ROA). To measure the level of risks of the banking sector, the macro-prudential indicators of banking activities were taken as proxies, which are already calculated by the Central Bank of Russian Federation in their monthly reports. To achieve the goal of our final qualifying work the following tasks were set: • Review of existing scientific studies on our work • Description of the theory of banking risks • Case sample for the banking sector of the Russian Federation • Regression analysis • Interpretation of results The structure of the work is represented by three chapters, introduction and conclusion, where the banking risk theory will be discussed briefly. In introduction, theory of banking risks will be discussed. In the first chapter, we will study existing research on the impact of the banking risks on the performance of banks. In the second chapter, we formulate the model and choose variables, explaining the reason for their choice. The third chapter will be the analysis and the interpretation of results.

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