Household Income and Financial Stability of the Banking Sector: Data from Russia

Olga Miroshnichenko (), Maria Vyshkovskaia and Valeriy Gamukin ()
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Olga Miroshnichenko: Tyumen State University
Maria Vyshkovskaia: Citibank

Chapter Chapter 4 in Systemic Financial Risk, 2024, pp 49-73 from Springer

Abstract: Abstract In this study, we investigate how household income affects the stability of the banking sector, and whether there is such impact at all. Using a sample of quarterly data of macroprudential indicators of the Bank of Russia for the period 2002–2019, we construct the financial stability index as an indicator capturing the resilience of the banking sector. The decomposition of the index showed that capital adequacy indicators as well as the ratio of the financial result to total assets and to capital react most sharply to unfavorable trends; strengthening of the stability level was facilitated by increased profitability, liquidity, and a decrease in market risk. Using the constructed index as a dependent variable, we model the effect of macroeconomic factors on the stability of the banking sector. Our results evidence that an increase in per capita loan volume has a positive effect on banking stability, while household income, oil prices, the level of overdue loans to the non-financial sector, and unemployment have a negative impact. We also confirm excessive risk taking by Russian banks during the periods of high oil prices, which requires additional efforts on the part of the regulator.

Keywords: Financial stability index; Banking regulation; Banking crises; Macroeconomic indicators; Bank profitability; G21; E44; D31 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-54809-3_4

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DOI: 10.1007/978-3-031-54809-3_4

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