"Crime and Punishment?" How Russian Banks Anticipated and Dealt with Global Financial Sanctions

Steven Ongena, Mikhail Mamonov and Anna Pestova

No 16075, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the impact of global financial sanctions on the Russian banks and economy. Financial sanctions were consecutively imposed between 2014 and 2019, allowing potentially-targeted (but not yet sanctioned) banks to adjust their international and domestic exposures. Compared to similar other banks, targeted banks immediately reduced their foreign assets. Yet, to deal with considerable domestic depositor withdrawals, targeted banks at first actually expanded their foreign liabilities. Once sanctioned, however, banks not only further reduced their foreign assets but also started to decrease their foreign liabilities as well. Despite the introduction of government support the sanctioned banks substantially contracted their lending to the domestic corporate sector resulting in a potential loss in domestic GDP of at least four percent. However, at the same time the sanctioned banks increased household lending by almost the same magnitude, mostly offsetting the loss in GDP. Finally, unique hand-collected board membership and location data coupled with a two-stage difference-in-differences approach that flexibly addresses potential treatment diffusion allows us to show that throughout this period state-controlled banks were not all equally recognized as potential sanction targets.

Keywords: Banks; Financial sanctions; Political influence; International borrowings; Foreign assets; Informational effects of sanctions; Treatment diffusion (search for similar items in EconPapers)
JEL-codes: E65 F34 G21 G41 H81 (search for similar items in EconPapers)
Date: 2021-04
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