Russian Banking System Research Articles

Analysis of the Impact of External Shocks on the Russian Banking System in the XXI Century

The main objective of the study was the identification of the key channel of impact of positive and negative external shocks on the Russian banking system for the period from 2000 to 2017. In conducting the study the author used systematic and statistical methods of analysis. Throughout the named period, the banking sector of Russia was always under the influence of one or another external shock: rising and falling oil prices; favorable conditions for obtaining financing on the global capital market; the global financial and economic crisis; the European debt crisis; the tapering of the quantitative easing policy in the USA; sanctions imposed on Russia by the Western countries. In the pre-crisis period, capital inflows became the main channel for the transmission of external shock. In the course of the European debt crisis, problems with attracting external financing became a key channel for the transfer of external shock. During the global crisis and the crisis of 2014–2016 the channels of transmission of external shocks to the banking sector of Russia, despite various causes, were in many ways similar. So, the main channels were the outflow of capital, the restriction of external financing, the collapse of the ruble exchange rate, and the state of confidence in the banking sector.

INFLUENCE OF MODERN FINANCIAL TECHNOLOGIES ON THE INSTITUTIONAL STRUCTURE OF THE RUSSIAN BANKING SYSTEM

The conditions, that stimulate the development of financial technologies in the banking sector, as well as the main directions of development of mobile technologies in the banking sector, have been defined. Based on the construction of a regression model, the impact of the development of mobile technologies on the institutional composition of the Russian banking system has been assessed, indicating, that with increased usage of the Internet and mobile technologies in the process of making customer payments, the number of internal structural units of existing credit institutions is reduced.

Retraction: Assessment of Russian banking system performance and sustainability

Retracted on August 17, 2020 by the Journal’s owner and Publisher. Type of retraction – plagiarism.There wasn’t a request for this retraction, but the reason for investigation of plagiarism fact was the Russian Academy of Sciences Committee’s report “Predatory Journals at Scopus and WoS: Translation Plagiarism from Russian Sources”: https://kpfran.ru/wp-content/uploads/plagiarism-by-translation-2.pdf” dated August 12, 2020. The publishing house has familiarized itself with the report. The article by Alexey Mikhaylov, Natalia Sokolinskaya and Evgeniy Lopatin (2019). Asset allocation in equity, fixed-income and cryptocurrency on the base of individual risk sentiment. Investment Management and Financial Innovations, 16(2), 171-181. doi:10.21511/imfi.16(2).2019.15 was mentioned in this report. It is noted that translation plagiarism was detected in this article - http://wiki.dissernet.org/wsave/IMFI_2019_2_1publ.html. Due to this the publishing house carried out an investigation on possible cases of plagiarism of all articles of these authors (Alexey Mikhaylov, Natalia Sokolinskaya and Evgeniy Lopatin) published in “Business Perspectives” journals. When the manuscript "Assessment of Russian banking system performance and sustainability" was submitted to the Journal for consideration, the authors signed the Cover letter and attested to the fact that their manuscript is an original research and has not been published before. Then, the manuscript was accepted for consideration by the Managing Editor and was tested for plagiarism using the iThenticate and Unicheck programs. Plagiarism was not detected. On August 12, 2020 the Russian Academy of Sciences Committee’s presented the report. Editorial staff decided to re-test all articles of mentioned authors for plagiarism using the iThenticate and Unicheck programs – the programs didn’t show the plagiarism, then the articles were tested for translation plagiarism by the experts of “Business Perspectives” and plagiarism was detected (plagiarism and paraphrases from Russian-language sources). According to the results of the investigation, the Publisher and owner of the journal decided to retract this article because of plagiarism on August 17, 2020.The authors were notified of such a decision.

A retrospective analysis of the provision of regions with banking services

This article is devoted to the assessment of interim results, the policy of the Bank of Russia to improve the banking system, in terms of trends of regional provision of banking services. A brief overview of the previous stages of transformation of the banking system of Russia is presented. The stage of recovery of the banking system with the characteristic of the main qualities and trends has been defined. A review of scientific literature on the investigated topic has been made among domestic authors, who in their works noted the intermediate results of the policy of recovery of the banking sector with forecast values of further development of such transformations. Quantitative indicators of institutional security of the national economy and meso-level by credit institutions are given, which allow to identify and interpret processes of change of institutional component of the banking sector of the country. Comparative quantitative and financial indicators of institutional development of the banking sector for the last 11 years are also presented in order to compare the current trends with the crisis period of 2009. Quantitative dynamics of credit institutions in terms of federal districts with determination of the share structure by macro-levels have been analyzed. The assessment of the regional banking environment is based on the North Caucasus Federal District as the least saturated territorial entity with banking institutions. In the regional section of the North Caucasus Federal District, an analysis of absolute and relative indicators, indices allowing to determine the degree of availability of banking services was carried out. Regions with the least access of economic agents to banking services have been identified, which indicates an increase in the economic spatial uneven regional environment with regard to the financial accessibility of the population and enterprises. The main intermediate negative results of the mega-regulator policy on "cleaning up" the banking sector have been systematized. Problematic aspects related to modern processes of structural and cluster optimization and consolidation of the banking system have been identified.

Mathematical model of optimizing the balance sheet structure of the Russian banking system with allowance for the foreign exchange risk levels

Mathematical model of optimizing the balance sheet structure of the Russian banking system with allowance for the foreign exchange risk levels

Russia’s Banking Sector in 2018

As of January 1, 2019, the Russian banking system numbered 484 credit organizations. A year earlier then number stood at 542. During the year the number decreased by 58 organizations. Six years ago at the beginning of 2013, the number of credit organizations exceeded one thousand (1094). The Bank of Russia policy aimed at clearing the banking sector has triggered a reduction of the number of banks in operation. Over this period, the Bank of Russia withdrew more than 400 banking licenses. From late 2014 the policy aimed at withdrawing from the market those credit organizations which do not satisfy the requirements of the regulator coincided with the deterioration of the situation in the Russian economy and the imposition of international sanctions on major Russian banks. Correspondingly, already from 2014 the rate of banking license revocation has increased. When in 2013, around 4–5 banks on average per month lost their licenses then in 2014 the rate of banking license revocation increased to 7 lending organizations per month, and during the time of peak manifestations of crisis in the Russian economy and financial system seen in 2015–2016 on average 8 credit organizations per month lost the right to continue their banking activity. The number of revoked banking licenses peaked in 2016: the number of revoked licenses during that year hit 97. Moreover, 2016 saw the peak on the aggregate amount of the bank assets of the banks which lost their banking licenses: RUB 1.7 trillion or 2.0 percent of the overall volume of the banking sector assets.

Velocity of Money: Economic Analysis of Dynamics

This paper presents the conclusions from the analysis of the velocity of money within the Russian banking system, as calculated according to the data of banking turnovers. Here, the emphasis is not on the analysis of accounting (technical) turnovers but the economically significant meaning of changes in the velocity of money.

The Relaxation of Complementary Slackness Conditions as a Regularization Method for Optimal Control Problems

A new approach to the transformation of solutions of optimal control problems based on the special form of relaxation of complementary slackness conditions is presented. The proposed approach is tested on the Russian banking system model, which is derived as a solution of a linear nonautonomous optimization problem with mixed constraints. It is shown that the use of this method regularizes the model in a sense it becomes applicable for the forecasting of the main Russian banking indicators.

Prospects for regional banks' development in modern conditions of the Russian banking system transformation

Prospects for regional banks' development in modern conditions of the Russian banking system transformation

Escrow Agreements (Ascrow) as the Basis for a New Complex Obligation

The paper is devoted to the scientific and practical apprehension of implementation of a new contractual design substantiating a complex obligation, namely, an escrow agreement, and its separation from similar civil law designs (such as escrow account, nominal account, storage, letter of credit, depositing of funds and securities to the notary public, etc.). Prior to introducing the escrow agreement, its existence in the property turnover was actually enforced by the escrow account rules introduced into civil law during the reform of the law of obligations. There is a close legal relationship between the escrow agreement (escrow) and the escrow account arising from the “contingency” of the obligation in question, but civilistic institutions under consideration are not identical. Its independence from the banking sector is considered to be an absolute advantage of the escrow agreement, as opposed to both the escrow account and the other securing financial mechanisms (such as a letter of credit, a safe deposit box lease agreement, etc.) in which the leading role belongs to banking organizations that are suffering crisis situations at the present stage of the existence of the Russian banking system. The United States are the ancestral home of the legal relations of obligations constructed in compliance with the model of the escrow agreement. Probably, this explains the term “escrow” that is absolutely strange for the Russian legal terminological framework and that is a synonym for the escrow agreement. Attention is drawn to the implementation of this contractual design for the needs of electronic business in the conditions of large-scale digitalization of the Russian legal and economic systems. The author concludes that the escrow agreement is able to organically fit into a number of new regulatory instruments of the law of obligations aimed at creating an attractive investment legal and economic environment in the Russian Federation.

Analysis of the transformation of the Russian banking system

The paper analyzes the development of the modern Russian banking system in the conditions of the trend of digital transformation. The aim of the work was to analyze the rehabilitation policy of the Central Bank in the field of banking sector regulation. The working hypothesis was that the reorganization of the financial system leads to an increase in monopolistic trends in the banking sector, while solving the key problems of the Russian banking system: a more objective reflection of problem assets in the balance of the banking system is achieved; the economic role of the “schematic” capital formation of the Russian banking system is declining, with the simultaneous growth of state ownership in the Russian banking system; a business model based on private business lending to its owners becomes inefficient. The paper conducts a qualitative and quantitative analysis of the development of the modern Russian banking system. A critical model of the activity of the Central Bank has been proposed, which allows a system analysis of the development of the Russian banking system at the transformation stage. The study clearly showed that monopolization of the banking sector leads to a decrease in the riskiness of the market strategy of individual banks, however, there is an increase in the probability of systemic shocks of the banking system as a whole.

The Current Monetary and Credit Policy of Russia in View of the Theory of Money Malfunction

The present day paradigm of monetary and credit policy in Russia was designed by the national monetary authority only a decade ago. In this period of time the economic theory within the frames of public information space was discussing the problem expediency and possibility of Russian banking system passing over to the regime of inflation targeting. At the same time top management of the Bank of Russia in its practical work was constantly discussing the task of potential passing over to the floating rate of the national currency as a precondition for introducing the regime of inflation targeting. But as long as mid-2014 the introduction of the floating rate of the national currency was postponed by top management of the Bank of Russia. The principle reason was the fact that national economy and national currency were not ready to face and stand the test. But in spite of evident counter indications this test took place. It should be mentioned that passing over of the national currency to the regime of free floating was introduced by the Bank of Russia before the appointed time. The article studies key challenges and contradictions of the present day monetary and credit policy in Russia, which would not allow it to increase its efficiency. It shows that these problems and contradictions are stipulated both by system vices of the present concept of monetary and credit policy in Russia and specific features of its designing and realizing by the Bank of Russia, by peculiar decisions made by the Board of Directors, specific understanding on the part of top management and executives of institutional, instrumental and procedure components of the transmission mechanism, including specific understanding of the essence and nature of inflation, i.e. the subject of management within the frames of the present monetary and credit policy in Russia. The author puts forward and substantiates the hypothesis that nature of inflation is connected with money malfunction. Practical recommendations were provided aiming at raising efficiency of monetary and credit policy in Russia. The expediency of status revision and functional reforms of the National Finance Board was shown.

The Russian banking system's development: Institutional differences and institutional rent

The Russian banking system's development: Institutional differences and institutional rent

Impact of spatial concentration of the Russian banking sector on lending to regions and small and medium businesses

The article considers how the spatial concentration of the banking sector in Russia, associated with the formation of an increasingly centralized and state-owned banking system, affects lending in the regions of the country. Foreign research in the field of financial geography indicates that spatial centralization of the banking system may hinder sufficient lending to regions remote from financial centers, as well as small and medium-sized businesses, especially in times of crisis. We analyze these conclusions in relation to Russia in 2010—2017. Centralization of the Russian banking system is largely predetermined by the centralization of the economy as a whole and contributes to the redistribution of credit resources from the capital to the regions of the country, but adequate lending to SMEs is a problem in this situation.

Currency regulation in Russian banking system

The liberalization of currency regulation in the 1990–2000s was «partial». To date, significant restrictions remain regarding the requirements of the law on the procedure for performing currency operations and the prohibitive nature of the activities of Russian business. Control mechanisms do not allow to achieve macroeconomic targets for the stability of the ruble. The authors state that there is a need for reform in this area. The monetary policy plays an important role in regulating the market economy. It is a set of measures implemented in the sphere of international monetary and economic relations in accordance with the current and strategic plans of the country. The monetary policy of Russia is aimed at ensuring stability of its currency and domestic foreign exchange market as factors of development of the national economy and international economic cooperation. This policy is implemented by including foreign currency denominated obligations in currency regulation. One of the means of implementing foreign exchange policy is currency regulation, which is understood as «a set of purposeful actions of the state to form or change existing public relations on currency values through the application of legal and economic measures of influence». The principle of state responsibility for national security and development of the national economy is a unique principle for the Russian legal system. This should be a constitutional principle common to all branches of the Russian law. The article analyzes to what extent the principles of legal security may influence the legal regime of currency control in the Russian banking system.

Трансграничные инвестиции Российской Федерации и банковская экспансия

The paper looks into the specifics of cross-border investments related to changes in the direction of capital flow. The growth factors regarding the export of capital have been identified from the point of view of the Neo-Keynesian theory of investment, which describes a situation when the economy of a country demonstrates a stable excess of the gross saving rate (gross saving to GDP ratio) over the gross accumulation rate (gross accumulation to GDP ratio), which can be the result of forcing exports and/or rapidly growing prices for the main export commodities. The paper presents the results of the evaluated international investment activity of the Russian Federation in 2018-2019, formed with standard components. The main indicators, characterizing financial stability and positions of the Russian banking system given the sectoral limitations, have been reported.The key trade and investment positions of the Russian Federation and the EU countries have been analyzed. Calculations have been made to demonstrate the volume of direct Russian investments in the EU countries within 2010-2017. Some peculiarities have been identified and the presence of asymmetry in the investment cooperation between the EU and the RF has been confirmed. Specific features of the Russian export of capital have been revealed. A range of factors, preconditioning a growth of flow of Russian bank capital to the countries of the EU, has been formed. The main parameters of the international investment activity of Russian banking institutions have been presented and some data have been given on the geographical distribution of foreign assets and liabilities of the Russian bank sector by groups of countries and individual (most attractive for Russian investment) countries of the world. It has been concluded that supporting European expansion of the national banking institutions could be one of the prioritized directions of the state policy of the Russian Federation in the banking sector.

The Research on Stability of the Russian Banking System by Machine Learning Methods

The problem of stability of the Russian banking system is investigated. To describe the state of a commercial bank, we use a system of indicators, proposed by F.T. Aleskerov and his colleagues. For predicting the development of banking system, the machine learning system implemented in the Azure ML is used. To optimize the work of this software, it is suggested to use integral indicators.

Boosting the Business Activity: Does the Banking System have a Potential?

Despite the currently observed positive dynamics of the industrial production, the problem of reversing the Russian economy to the sustainable and balanced growth has not been resolved. The expansion of the investment lending by banks might give the necessary impetus to the economic development; however, the weak demand of corporate borrowers for long-term loans of late is counterbalanced by the unwillingness of creditors themselves to be at risk. The purpose of the study was to identify the reasons why the Russian banking system practically lost its potential to promote the business activity in the economy. The paper analyzes the expectations and uncertainty factors in the economy, exposes weaknesses of the resource base and the loan portfolio of the banking system and reveals the key trends in the regulation of the financial-and- banking sector. It is concluded that the problems aggregated during the last two crises, combined with the attitude of the regulator insisting on the limited role of banks in investment lending, do not allow the banking system to prove itself as one of the main driving forces contributing to the growth of other market segments.

Business Activity and Assessment of the National Banking System in Terms of the VBM Concept

The reform of the Russian banking system is being stalled due to the imperfection of existing methods of assessing both the whole market value of business and its banking segment. This circumstance restrains the business activity of Western investors in the Russian financial market, provokes momentary speculative sentiments in it and strengthens crisis factors. The purpose of the research was to reveal the relevance and the possibility of applying the VBM concept, recognized and accepted in the majority of developed economies, to the banking business. The analysis of the works of foreign and domestic authors shows the need for further Russian theoretical developments. It is proved that the banking business market in Russia is undervalued. Based on the aggregate analytical data, the free cash flow to equity (FCFE) of the banking system is calculated. Based on the net profit of the banking system, its market value and the range of values in which it can be found are estimated. It is concluded that the growth of the Russian banking system measured in terms of capital and assets does not lead, as a minimum, to the growth of the market value, and, as a maximum, is accompanied by a decline in the market value. The prospects of the practical use of the VBM concept both for individual bank management and for the industry in the whole are substantiated.

Current Problems of Banking Supervision and Regulation: A New Evidence

At present, in the era of globalization, the banking sector failure in one country can cause negative externalities for the financial institutions of other states. The fundamental problem of implementing standards based on Basel II is that these standards contribute to the development of pro-cyclicality of banking regulation. The authors emphasize the need to design such a regulatory system, which should contribute to innovative development and at the same time restrain socially dubious novelties. Therefore, the article substantiates the need to increase the size of the capital buffer, which is intended to address the problem of improving the financial situation and increasing the financial viability of the largest banks and banking systems. This reduces risks and increases the capital safety cushion, as well as optimizes the impact on the commercial banks behavior caused by the use of counter-cyclical capital regulation requirements.The conducted research supported the hypothesis put forward by the authors that when forming a countercyclical capital buffer it is necessary to focus on indicators of: return on assets of the banking system (RO?) and return on equity (ROE), depending on GDP growth, but this dependence does not become evident immediately, but with a time lag of 1 year. The object of the research is the banking system of Russia.