The impact of financial risks on the performance of russian banks (2016–2017)

Abu-Alrop D.

This study examines the impact of financial risks on 85 Russian commercial banks in 2016–17. The study uses financial ratios and multiple regression analysis to determine the impact of financial risks on traditional performance indicators in Russian banks. The study includes six main types of financial risk: interest rate risk (IRR), currency risk (FXR), liquidity risk (LR), credit risk (CRR), operational risk and leverage risk (LVR). In terms of performance indicators, they include three traditional performance indicators: net interest margin (NIM), return on assets (ROA), return on equity (ROE). The study showed that during both years of the study, risk contributed to the formation of performance indicators for NIM, ROA and ROE by 37%, 52% and 22%, respectively, which reflects how important the impact of risk on the performance of Russian banks. The study also showed that financial leverage risk, operational risk, and credit risk affected the performance indicators to varying degrees. On the other hand, interest rate risk, foreign currency risk and liquidity risk did not affect performance indicators. The study concluded that Russian banks should pay particular attention to leverage risks (LEV) due to their apparent negative impact on performance indicators.

Keywords:Risk, Financial Ratios; Multiple Regression Analysis; Return on Assets; Return on Equity; Net Interest Margin; Russian Banks; Risk Indicators.