Effect of Banking Sector Resolution on Competition and Stability

Anna Kruglova () and Yulia Ushakova ()
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Anna Kruglova: Bank of Russia, Russian Federation
Yulia Ushakova: Bank of Russia, Russian Federation
Authors registered in the RePEc Author Service: Юлия Ушакова

No wps22, Bank of Russia Working Paper Series from Bank of Russia

Abstract: We assess the effect of the banking sector resolution policy conducted by the Bank of Russia on competition and stability in the banking sector. We use the rate spread to measure competition and volatility in loan portfolio growth, set against volatility in growth of the banking sector’s aggregate loan portfolio, to measure the system’s stability. Our findings are as follows: After the launch of the banking sector resolution, a significant break in competition, as measured by the rate spread, was observed only in household deposits maturing in one to three years and household and corporate loans maturing in more than three years. This kind of structural break, however, is associated with macroeconomic factors rather than the Bank of Russia’s banking sector resolution. Other banking markets failed to see any significant change in competition after the launch of the banking sector resolution. After the launch of the Bank of Russia’s banking sector resolution, growth in corporate and retail lending showed a decline in volatility. This decline was observed both in a cluster of banks characterised by relatively low overdue debt, and in banks characterised by relatively high levels. Thereby, the reduction in the number of banks resulting from the Bank of Russia’s banking sector resolution had no considerable negative effect of competition in the period under review. At the same time, lower volatility in lending growth boosted banking system stability. We estimate that banking sector stability has grown by 4% in retail lending and 41% in corporate lending

Keywords: Russian banking sector; banking licence; banking sector resolution; competition; banking sector stability (search for similar items in EconPapers)
JEL-codes: E43 G21 G28 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2017-07
New Economics Papers: this item is included in nep-ban, nep-cis, nep-com, nep-mac and nep-tra
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