Survival of Russian banks: how efficient are the control measures?

European Journal of Management and Business Economics. 2023. Vol. 32. No. 3. P. 320–341.

Barajas A., Krakovich V., Lopez Iturriaga F. J.

Purpose

In this paper, the authors study the failure of Russian banks between 2012 and 2019.

Design/methodology/approach

The authors analyze the entire population of Russian banks and combine a logit model with the survival analysis.

Findings

In addition to the usual determinants, the authors find that not-failed banks have higher levels of fulfillment of the Central Bank requirements of solvency, liquidity, provide fewer loans to their shareholders and own more shares of other banks. The results of this study suggest an asymmetric effect of the strategic orientation of banks: whereas the proportion of deposits from firms is negatively related to the probability of failure, the loans to firms are positively related to bankruptcies. According to this research, the fact of being controlled by a foreign bank has a significant negative relationship with the likelihood of failure and moderates the effect of bank size, performance and growth on the bankruptcy likelihood.

Practical implications

On the whole, the results of this study support the new Central Bank rules, but show that the thresholds imposed by the Russian regulator actually do not make a difference between failed and not failed banks in the short and medium term.

Originality/value

The authors specially focus on the effectiveness of new rules issued by the Central Bank of Russia in 2013.

Keywords: capital adequacy, bankruptcy, bank failure prediction