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The impact of banks’ capital adequacy ratio on bank lending channel of monetary transmission in Russia

Olga Borzykh


Abstract: The new Basel III rules of macroprudential regulation were introduced for the Russian banking sector in 2014. This article analyzes a previously unexamined for Russia impact of capital adequacy ratio on the effectiveness of bank lending channel. It is shown that when banks satisfy capital regulation rules this has a direct influence on this channel of monetary transmission mechanism: a high capital adequacy ratio weakens a contractionary effect of an increase in the Bank of Russia key rate and further stimulates credit growth when the Bank of Russia decreases its key rate. The peculiar properties of the Bank of Russia key rate dynamics in the previous years allowed to reveal the asymmetry of monetary transmission. Such an analysis also reflects the value-added of the present study.

Keywords: banks; bank lending channel; Bank of Russia; macroprudential policy; capital adequacy ratio; Russian banks; groups of banks. (search for similar items in EconPapers)
JEL-codes: C23 C55 E51 E52 E58 E65 G21 G28 (search for similar items in EconPapers)
Date: 2017
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