Sofronova V.V.National Research University Higher School of Economics – Nizhny Novgorod, Nizhny Novgorod, Russian Federation valentina.nnov@mail.ru
Importance Recently, more and more academic economists research the behavior and reasons for decreasing the financial stability of bank under economic decline, increasing credit risks, reducing return on assets, equity and capital adequacy to cover risks. Objectives The study aims to analyze the financial sustainability of Russian banks based on the assessment of changes in such indicators as ‘bad’ assets, return on equity and return on assets, non-performing loans, and others. Methods The study employs methods of analysis, synthesis and generalization of phenomena in the banking sector; econometric analysis and modeling of factors affecting the financial stability of banks. Results I determined reasons for declining financial sustainability of banks during the current period, revealed the degree of impact of bank performance indicators on financial stability, built a model to assess the probability of change in bank’s financial strength with certain predictive power, and obtained reliable results of practical application of the model. Conclusions The financial stability of the Russian banking sector is deteriorating due to growing credit risks. I propose amendments to credit policies of banks to the extent of adjustment of the system of credit risk assessment of bank’s borrowers, taking into account macro-economic and political risks.
Keywords: bank, financial strength, credit risk
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