MODELING SUSTAINABILITY OF THE RUSSIAN BANKS AMID BANKING SYSTEM REFORM

This article presents results of mathematical and statistical modeling research of sustainability of banks’ functioning that is relevant in light of banking system reforms. Basic concept for these constructions lies in the understanding of stability (or reliability) of business operation, financial state of which in normal circumstances ensures the fulfillment of all its obligations to the employees, other organizations and the State due to sufficient income and the matching of cost with revenue. Some of the most significant for the analysis of banks’ stability (reliability) indicators are available for all users (individuals as well as organizations) in the form of monthly financial reports submitted by the majority of banks, which are uploaded to the official site of the Bank of Russia and are duly and timely updated. In the authors’ opinion these indicators include some for which the Bank of Russia defines normative values. Although, monitoring the degree of consistency between actual indicators and regulations is far from being an ideal instrument to analyze bank reliability (i.e. to determine the situation that does not lead to license revocation), values of these indicators in the authors’ opinion are sufficient characteristics to establish financial health of a credit institution.

This article studies the nature of statistical relationship between trends of quantity values of the most vital aspects of banks’ activities and the probability of license revocation. The specific feature of models’ construction is the automatic choice of the functional entry form for bank characteristics. For this purpose, the authors use the generalized polynomials, which makes it possible to select model specification most comparable to data attributes.

The study was conducted on the basis of the public records of 887 banks for the period from 01.01.2013 to 01.12.2015. For this analysis, the authors used reports from already operating banks, in particular those that have just started operation, as well as banks that were liquidated in that period (some of the banks that operated during the research period later, in 2016 and 2017, also lost their licenses). The results of the model evaluation demonstrated a high degree of comparability of the entry form for bank characteristics with their economic substance and the Bank’s ofRussiaregulations. Quality comparison between the classical binary choice model for panel data and a model based on generalized polynomials shows a distinct advantage of the latter.

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