Impact of Income Diversification on Financial Stability of Banks

Student: Egorova Valentina

Educational Programme: Economics (Bachelor)

Year of Graduation: 2021

This research examines the relation between income diversification and financial stability and profitability of 240 Russian banks over the period from the fourth quarter of 2013 to the fourth quarter of 2020. The change in strategies of development of banks, the introduction of financial technologies in banking, the reduction of the key rate and the high interest of the scientific community emphasize the relevance of this issue. As a result of the regression analysis, it was found that income diversification has a positive effect on the stability of Russian banks, especially small banks, but increases the risks of reducing profitability, but for small banks to a lesser extent. The study also demonstrates that, in general, a reduction in the key rate encourages income diversification in banks, but for banks with a basic license (small banks), a reduction in the key rate is not a significant factor for income diversification.

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