The Determinants of Bank Defaults: Case of Russian Federation

Abstract

Are there any other factors besides the legal ones that determine the increasing number of bank defaults in Russian Federation? In other words, what drives the Central Bank of Russia to revoke a license from a bank? To answer this question I employ a panel logit estimation technique within the sample of 2012 to 2014, monthly observations. The results of the study present that there are both macroeconomic indicators and bank fundamentals that determine the probability of a bank default. Moreover, the study establishes a particular logit model with a specified time lag of main explanatory variables that performs the best in prediction of bank defaults.