State University

Higher School of Economics

Faculty: Economics

Department: Banks and Banking

DRAFT

of the paper

«Classification and Clustering of Russian Banks for Calculation of Operating Efficiency»

Student: Alina Malyukova

Group: 41BBD

Argument Consultant: A.V.Vernikov

Language Consultant: N.V. Guskova

Moscow – 2013

Content

Y

Introduction 3

Chapter 1 5

Chapter 2 7

Chapter 3 9

Conclusion 10

Bibliography 11

Introduction

Bank operations are significant for the financial system and the economy. Banks reallocate funds from savers to borrowers in an efficient manner. They provide specialized financial services, which reduce the cost of obtaining information about savings and borrowing opportunities. Meanwhile the crucial function of banks is financial intermediation.

One of the features of the Russian banking system is its segmentation. In order to analyze any factor, such as efficiency, profitability or competitiveness of banks, it is important to choose appropriate groups of banks with comparable characteristics. It allows analyzing operations and risks of different groups of banks, assessing the structure of various segments of the banking market and prospects of economic trends in these segments.

As analytical surveys show, the problem of adequate clustering of Russian banks has not been solved yet. Most of classifications consider banks according to forms of ownership, size or the amount of assets or loans. On the basis of ownership, banks are divided into 3 categories: state-owned banks, foreign-controlled and domestic private banks. On the basis of size, banks can be classified into: large, medium-sized and small banks. According to the functions performed, banks can be broken down into: commercial banks, investment banks, saving banks and others. All these classifications are too generalized, neglect some important details and leave unclassified some banks with comparable characteristics. So the problem of classification and clustering of Russian banks has been brought forefront. The novelty and topicality of this study is to obtain a better classification of Russian banks for calculation of operating efficiency.

The aim of this study is to organize Russian banks into groups with consistent or comparable characteristics. To implement that aim, the following tasks will be performed:

1. Investigation of theoretical base of existing classifications and groupings of Russian banks;

2. Estimation of factors that are relevant for clustering of banks;

3. Determination of an appropriate number of groups of Russian banks;

4. Comparison the new classification with existing ways of clustering;

5. Empirical testing.

The object of this study is Russian banking sector with the exception of non-banking financial institutions, or simply Russian banks.

The subject of this study is classification and clustering of these banks for calculation of operating efficiency.

According to the purpose and objectives the logic of the research is the following:

Firstly, theoretical aspects of existing classifications of Russian banks will be considered. The most significant research papers that employ the clustering of Russian banks will be examined.

Then, the methodology, was applied for classifications, will be analyzed. Any advantages and disadvantages of these methods will be studied.

Part 3 of the study will focus on issues of practical application of methodology to empirical research and will test proposed method.

Finally, the conclusion will contain main findings and suggestions regarding a new classification of Russian banks for empirical studies of comparative efficiency.