Vulnerability of Russian Systemically Important Domestic Banks to Large-Scale Deposit Outflow

Abstract

Purpose: This paper assesses the vulnerability of a group of Russian systemically important banks (SIBs) to large-scale withdrawal of individual deposits. In the case of a banking panic, Russian SIBs are at risk because they have a significant number of deposits from individuals and because the deposit insurance system is not designed to prevent a systemic crisis. Methods: The authors identified numerical values of indicators for safe “corridor” boundaries reflecting the degree of dependence of SIBs on depositors using exponential smoothing technique. Findings: The indicators exceeding the upper limits of the “corridor” reveal a disproportion in the structure of banking resources sources, which can be called a “deposit bubble”. If such a “deposit bubble” bursts, it will lead to the loss of a significant part of bank liabilities, which means a potential risk of a suspension of banking activities. If the indicators go beyond the lower limits of the “corridor”, it shows the realized risk of an outflow of individual deposits and, accordingly, a reduction of bank liabilities.