The Influence Analysis of the Different Factors on the Probability of License Revocation from Russian Banks

In recent years, the policy of cleansing the Russian banking sector from problematic credit organizations has sparked lively discussions and great interest in studying this event. There is a vast amount of theoretical and empirical approaches to studying the influence of factors on the successful functioning of a bank and the reasons causing financial insolvency and instability of credit organizations. The purpose of this study is to identify the causes of banking instability and to analyze the impact of macroeconomic financial and non-financial indicators on the probability of revocation of licenses from banks in Russia for various reasons during the period from 2019 to 2021. For empirical analysis, both linear and logistic binary models using generalized polynomials with random effects were built, allowing for the consideration of within-group correlation and data heterogeneity. The results revealed that banks with a high share of overdue debt, those adopting a policy of attracting funds from other banks, as well as those with high current liquidity values are more susceptible to being absorbed by a larger and financially stable and successful bank. Also, due to independent verification and evaluation of activity, a bank may decide to self-liquidate, and most often this happens due to a high share of overdue debt, low asset profitability, as well as a high level of lending to individual and corporate clients. The most common cases involve the revocation of a bank's license due to violations of federal laws and regulatory acts of the Central Bank. Thus, reducing the level of regulations, increasing the share of reserves, and the level of funds attracted from individuals and legal entities lead to the revocation of a license to carry out credit operations by the regulator. The results of this study can be used by the regulator to conduct a more qualitative policy, as well as by banks for independent evaluation of activities and the implementation of more effective mechanisms of internal control and resource management to improve operational activities.