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Estimation of Systemic Effects from Tightening of Prudential Regulation of the Banking Sector

Mikhail Mamonov (), Anna Pestova and Oleg Solntsev

Problems of Economic Transition, 2013, vol. 56, issue 7, 37-74

Abstract: The article analyzes measures taken by the Bank of Russia in response to the occurrence of a problematic situation characterized by three "stress points": signs of new overheating of the credit market, a significant decrease in bank capital adequacy ratios, and exacerbation of the problem of affiliated banks. Using the stress test methodology, the study concludes that these measures are inadequate and not very effective. Proposals are formulated for harmonizing prudential regulation. In these proposals the emphasis is on creating and introducing programs to develop new markets for financial services provided by banks. This will foster the growth of banking sector profitability without taking additional credit or market risks, which will make it possible to increase the sector's capitalization and eliminate the need of banks for government support of their capital.

Date: 2013
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DOI: 10.2753/PET1061-1991560703

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Handle: RePEc:mes:prectr:v:56:y:2013:i:7:p:37-74