Price interactions in the credit market and banks instability over the crisis and non-crisis periods in the Russian economy

M. Mamonov
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M. Mamonov: Center for International Economics Research at the Institute for International Studies (IIS), MGIMO-University, Moscow, Russia

Journal of the New Economic Association, 2020, vol. 45, issue 1, 65-110

Abstract: This paper examines price competition in various segments of credit market and how this competition affects banks' exposure to risks during thecrisis and non-crisis periods of system-wide strengthening of competition in the Russian banking system over 2004-2015. Distinctly from previous studies, this paper measures price competition with the reactions of each bank on the changes of average interest rates induced by other banks within- and between different competing groups. We consider the following four groups of banks: Sberbank (group 1), top-30 banks except Sberbank (in terms of assets, group 2), top-100 banks except top-30 (group 3), and all the others (group 4). The estimation results suggest that the intensity of the competition impact on the instability of reacting banks depends substantially on (i) who reacts, (ii) which segment of credit market is considered and during which phase of the business-cycle a given reaction occurs. For the retail segment, obtained results indicate that the group 1 (Sberbank, the market-maker) is the most efficient among all groups (i.e., it is able to improve its stability by successful price interactions with other banks). For the other bank groups, the results reveal the effects of risk redistribution within a given bank between credit and non-credit risks. For the corporate segment, distinctly from the retail one, no example of the risks' redistribution effects is found while the mutual risks amplifications are observed only in reactions of the group 2 (banks 2-30) and only during the crisis periods.

Keywords: banks; retail and corporate credit; price reactions; interest rates; price wars; economic crises; banks' instability (search for similar items in EconPapers)
JEL-codes: C23 D22 D43 G21 G28 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:nea:journl:y:2020:i:45:p:65-110

DOI: 10.31737/2221-2264-2020-45-1-3

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