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Modeling the Default Probabilities of Russian Banks: Extended Abillities

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Author Info

  • Karminsky, A.

    (Higher School of Economics, Moscow, Russia)

  • Kostrov, A.

    (Higher School of Economics, Moscow, Russia)

Abstract

Using binary choice logistic regression with quasi panel data (1998-2011) to develop a probability of default model for Russian banks we have found that: 1) there is a quadratic interaction between bank's capital adequacy ratio and its default probability; 2) there is a negative relationship between the bank's monopoly power and its PD; 3) macroeconomic, institutional and time factors significantly improve the model quality. We believe that these results will be useful for national financial regulatory authorities as well as for commercial banks in risk management.

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Bibliographic Info

Article provided by New Economic Association in its journal Journal of the New Economic Association.

Volume (Year): 17 (2013)
Issue (Month): 1 ()
Pages: 64-86

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Handle: RePEc:nea:journl:y:2013:i:17:p:64-86

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Related research

Keywords: probability of default (PD); banks; Russia; risk-management; internal ratings; IRB approach; Basel II;

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References

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  1. Claeys, Sophie & Schoors, Koen, 2007. "Bank supervision Russian style: Evidence of conflicts between micro- and macro-prudential concerns," Journal of Comparative Economics, Elsevier, vol. 35(3), pages 630-657, September.
  2. Alejandro Micco & Ugo Panizza & Monica Yañez, 2005. "Bank Ownership and Performance Does Politics Matter?," Working Papers Central Bank of Chile 356, Central Bank of Chile.
  3. Männasoo, Kadri & Mayes, David G., 2009. "Explaining bank distress in Eastern European transition economies," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 244-253, February.
  4. Peresetsky, Anatoly A. & Karminsky, Alexandr A. & Golovan, Sergei V., 2004. "Probability of default models of Russian banks," BOFIT Discussion Papers 21/2004, Bank of Finland, Institute for Economies in Transition.
  5. Fungacova, Zuzana & Weill, Laurent, 2009. "How market power influences bank failures: Evidence from Russia," BOFIT Discussion Papers 12/2009, Bank of Finland, Institute for Economies in Transition.
  6. Benjamin M. Tabak & Giovana L. Craveiro & Daniel O. Cajueiro, 2011. "Bank Efficiency and Default in Brazil: Causality Tests," Working Papers Series 253, Central Bank of Brazil, Research Department.
  7. Reinout De Bock & Alexander Demyanets, 2012. "Bank Asset Quality in Emerging Markets," IMF Working Papers 12/71, International Monetary Fund.
  8. Anzoategui, Diego & Pería, María Soledad Martínez & Melecky, Martin, 2012. "Bank competition in Russia: An examination at different levels of aggregation," Emerging Markets Review, Elsevier, vol. 13(1), pages 42-57.
  9. Andrei Vernikov, 2011. "Government Banking in Russia: Magnitude and New Features," IWH Discussion Papers 13, Halle Institute for Economic Research.
  10. Пересецкий А.А., 2007. "Методы Оценки Вероятности Дефолта Банков," Журнал Экономика и математические методы (ЭММ), Центральный Экономико-Математический Институт (ЦЭМИ), vol. 43(3), июль.
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