Bank cost efficiency in Kazakhstan and Russia

The Kazakhstan banking system is increasingly viewed as more advanced than the Russian system. Kazakhstan adopted the International Accounting System (IAS) in 2003 and the Basel II norms in 2005, while Russia has yet to fully adopt either IAS or Basel II. In this paper, bank data for 2002-2006 are used to estimate models of bank cost efficiency. In contrast to most previous papers, no significance difference is found for the average cost efficiency scores of banks for the two countries during 2002-2006. How banks are ranked for efficiency depends upon the chosen model (input and output sets). An interesting insight is the finding that most banks in both countries are below optimal size.cost efficiency; banks; stochastic frontier approach

Market Discipline and Deposit Insurance

The paper examines Russian banks’ household deposit interest rates for the transition period of setting up the deposit insurance system. Monthly observations of Russian banks’ interest rates and balance sheets are used in a fixed effects panel data model. It is shown market discipline has been significantly diminished after switching to the deposit insurance.market discipline; deposit insurance; Russia; deposit interest rates

Models for Moody’s bank ratings

The paper presents an econometric study of the two bank ratings assigned by Moody's Investors Service. According to Moody’s methodology, foreign-currency long-term deposit ratings are assigned on the basis of Bank Financial Strength Ratings (BFSR), taking into account “external bank support factors” (joint-default analysis, JDA). Models for the (unobserved) external support are presented, and we find that models based solely on public information can reasonably well approximate the ratings. It appears that the observed rating degradation can be explained by growth of the banking system as a whole. Moody’s has a special approach for banks in developing countries and Russia in particular. The models help reveal the factors that are important for external bank support.banks; ratings; rating model; risk evaluation; early warning system

The price of Moscow apartments

We present a simple hedonic model for apartment prices in Moscow in the year 2003. Based on some 15,000 observations we estimate the model and use the estimates for prediction. Pretest issues are explicitly taken into account.Hedonic prices; Moscow; pretesting

Russian banks´ private deposit interest rates and market discipline

This paper examines the extent to which the observed diversity of private deposit interest rates in Russia is explained by bank financial indicators. We also test for whether the introduction of the bank deposit insurance scheme in 2005 affected deposit interest rates. Our results suggest market discipline in the Russian banking system involves Russian depositors demanding higher deposit interest rates from banks with risky financial policies. This discipline seems stronger than in developed countries. Our study suggests also that the risks taken by banks increased after introducing the deposit insurance.banking; deposit interest rates; moral hazard; deposit insurance; Russia

Models for the External Support Component of Moody's Bank Ratings

The paper presents an econometric study of the two bank ratings assigned by Moody's Investors Service. We find the models based solely on public information can approximate the ratings reasonably well. It is demonstrated that Moody’s has a special approach for banks in developing countries and in Russia particularly. Models for the (unobserved) external support are presented. The models help reveal factors that are important for the external bank supportBank ratings; rating agency; rating’s model; modeling unobserved factor; matching ratings

Probability of default models of Russian banks

This paper presents results from an econometric analysis of Russian bank defaults during the period 1997–2003, focusing on the extent to which publicly available information from quarterly bank balance sheets is useful in predicting future defaults. Binary choice models are estimated to construct the probability of default model. We find that preliminary expert clustering or automatic clustering improves the predictive power of the models and incor-poration of macrovariables into the models is useful. Heuristic criteria are suggested to help compare model performance from the perspectives of investors or banks supervision authorities. Russian banking system trends after the crisis 1998 are analyzed with rolling regressions.banks; Russia; probability of default model; early warning systems

Models of Banks Ratings

The paper studies the banks ratings models developed by using publicly available financial indicators. Models for Moody’s ratings of long-term deposits in foreign currency are constructed. The database includes banks financial data of emerging markets and the European Union. Additionally, financial macroeconomic variables and the country’s rating are considered as key factors. The hypothesis of the negative trend in ratings is tested. The forecast power has been improved by nonlinear rescaling of banks financial indicators. The agency approach to determining emerging market banks ratings is examined. Models of Russian banks ratings are constructed.Bank ratings; Moody’s; rating’s models; ordered probit model