Template-type: ReDIF-Article 1.0
Author-Name: Lev Fomin
Author-Email: lfomin@nes.ru
Author-Workplace-Name: PJSC Bank Otkritie Financial Corporation
Title: Do Higher Interest Rates on Loans and Deposits and Advertising Spending Cuts Forecast Bank Failures? Evidence from Russia
Abstract: This study builds a probabilistic model of Russian bank defaults. Microdata from the monthly financial and regulatory statements that Russian banks submit to the Bank of Russia are analysed, covering the period from July 2010 to December 2017. A model incorporating a standard set of reliable predictors of bank defaults is augmented by three novel predictors: the excess of deposit and loan rates over the respective cross-section averages, and the ratio of spending on advertising to the bank's assets. These predictors are statistically significant in logit regressions that forecast bank defaults and improve the forecasting power of the model, although relatively moderately. The too-big-to-fail premise is not supported by the data.
Classification-JEL: G2, G21, G33
Keywords: bank closure, bankruptcy, CAMEL indicators, Russia's banking sector
Journal: Russian Journal of Money and Finance
Pages: 94-112
Volume: 78
Issue: 2
Year: 2019
Month: June
DOI: 10.31477/rjmf.201902.94
File-URL: https://rjmf.econs.online/upload/iblock/678/RJMF_78-02_ENG_Fomin.pdf
Handle: RePEc:bkr:journl:v:78:y:2019:i:2:p:94-112