Impact of Loan Portfolio Diversification on the Probability of Bank's License Revoking

The development and stability of the banking sector plays a significant role in the development of the economy as a whole. The question of exactly what factors influence the revocation of a bank's license is important and is studied in many works. There is a lot of research on the Russian sector, but if you look at the analysis in the context of the impact of diversification, we can say that this topic is not sufficiently developed. The paper will consider how the diversification of the loan portfolio can affect the likelihood of revoking a bank's license in the Russian market. As the analyzed time interval, we chose the period of the rapid purge of the banking sector, more precisely, from 2014 to 2020. In particular, diversification metrics have been developed and borrowed. It is expected that banks operating closer to the economic and financial centers of the country, as well as concentrating funds in this way, have lower credit risks and, therefore, a lower probability of license revocation.