Preview

Voprosy Ekonomiki

Advanced search
Open Access Open Access  Restricted Access Subscription Access

The Systemic Effects of Prudential Regulation Toughening:The Results of a Stress-test for Russian Banks

https://doi.org/10.32609/0042-8736-2012-8-4-31

Abstract

The stability of Russian banking sector is threatened by three negative tendencies - overheating of the credit market, significant decrease of banks capital adequacy ratios, and growing problems associated with banks lending to affiliated non-financial corporations. The co-existence of these processes reflects the crisis of the model of private investments in Russian banking sector, which was observed during the last 20 years. This paper analyzes the measures of the Bank of Russia undertaken to maintain the stability of the banking sector using the methodology of credit risk stress-testing. Based on this methodology we conclude that the Bank of Russias actions can prevent the overheating of the credit market, but they can also lead to undesirable effects: further expansion of the government ownership in Russian banking sector and substitution of domestic credit supply by cross-border corporate borrowings. The later weakens the competitive positions of Russian banks. We propose a set of measures to harmonize the prudential regulation of banks. Our suggestions rely on design and further implementation of the programs aimed at developing new markets for financial services provided by Russian banks to their corporate and retail customers. The estimated effects of proposed policy measures are both the increase in profitability and capitalization of Russian banks and the decrease of banks demand for government support.

About the Authors

M. Mamonov
Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF) (Moscow, Russia)
Russian Federation


A. Pestova
Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF) (Moscow, Russia)
Russian Federation


O. Solntsev
Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF) (Moscow, Russia)
Russian Federation


References

1. Mamonov M., Pestova A., Magomedova Z., Solntsev O. (2011). The Experience in Developing Early Warning System for Financial Crises and Banking Sector Development Forecasts for 2011—2012 // Journal of the New Economic Association. No 12. P. 41—77.

2. Kravchenko E., Lyutova M. , Pismennaya E., Plotonova O. (2012). Russia’s Economy Threatens Credit Overheat, According to the IMF // Vedomosti. April 23.

3. Solntsev O., Pestova A., Mamonov M. (2010). Stress-testing Russian Banking System: Will Banks Need Government Assistance Again? // Voprosy Ekonomiki. No 4. P. 61—81.

4. Shestopal O., Saprov I. (2012). Banking Risks Have Gone Beyond the System // Kommersant. April 6.

5. Basel Committee on Banking Supervision (2009). Proposed Enhancements to the Basel II Framework. Consultative Document. Bank for International Settlements. April 17.

6. Board of Governors of the Federal Reserve System (2009). The Supervisory Capital Assessment Program: Overview of Results (Washington, DC: Board of Governors, May 7).

7. Board of Governors of the Federal Reserve System (2012). Comprehensive Capital Analysis and Review 2012: Methodology and Results for Stress Scenario Projections. Washington, DC. March 13).

8. Boss M. (2002). A Macroeconomic Credit Risk Model for Stress Testing the Austrian Credit Portfolio // Financial Stability Report. No 4 / Oesterreichische Nationalbank.

9. Committee of European Banking Supervisors (2010). Aggregate Outcome of the 2010 EU Wide Stress Test Exercise Coordinated by CEBS in Cooperation with the ECB.

10. European Banking Authority (2011). EU-wide Stress Test: Aggregate Report.

11. Guo K., Stepanyan V. (2011). Determinants of Bank Credit in Emerging Market Economies // IMF Working Paper. No 11/51.

12. Nkusu M. (2011). Nonperforming Loans and Macrofinancial Vulnerabilities in Advanced Economies // IMF Working Paper. No 11/161.

13. Pesola J. (2007). Financial Fragility, Macroeconomic Shocks and Banks Loan Losses: Evidence from Europe // Bank of Finland Research Discussion Papers. No 15.

14. Roodman D. (2006). How to Do xtabond2: An Introduction to Difference and System GMM in Stata // Center for Global Development Working Paper. No 103.

15. Sorge M. (2004). Stress-testing Financial Systems: An Overview of Current Methodologies// BIS Working Papers. No 165.


Review

For citations:


Mamonov M., Pestova A., Solntsev O. The Systemic Effects of Prudential Regulation Toughening:The Results of a Stress-test for Russian Banks. Voprosy Ekonomiki. 2012;(8):4-31. (In Russ.) https://doi.org/10.32609/0042-8736-2012-8-4-31

Views: 657


ISSN 0042-8736 (Print)