Template-Type: ReDIF-Paper 1.0
Author-Name: Anna Kruglova
Author-Email: Kruglovaap@cbr.ru

Author-Workplace-Name: Bank of Russia, Russian Federation

Author-Name: Yulia Ushakova
Author-Email: ushakovayuv@cbr.ru

Author-Workplace-Name: Bank of Russia, Russian Federation


Title: Effect of Banking Sector Resolution on Competition and Stability

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


Length: 29 pages
Creation-Date: 2017-07
Revision-Date:
Publication-Status:
File-URL: http://cbr.ru/Content/Document/File/87557/wps_22_e.pdf
File-Format: Application/pdf
File-Function:
Number:wps22
Classification-JEL: G28, G21, E43.
Keywords: Russian banking sector, banking licence, banking sector resolution, competition, banking sector stability
Handle:RePEc:bkr:wpaper:wps22