Russian banking: The state makes a comeback?

The purpose of this paper is to carefully assess the size of public sector within the Russian banking industry. We identify and classify at least 78 state-influenced banks. For the state-owned banks, we distinguish between those that are majority-owned by federal executive authorities or Central Bank of Russia, by sub-federal (regional and municipal) authorities, by state-owned enterprises and banks, and by ‘state corporations’. We estimate their combined market share to have reached 56% of total assets by July 1, 2009. Banks indirectly owned by public capital are the fastest-growing group. Concentration is increasing within the public sector of the industry, with the top five state-controlled banking groups in possession of over 49% of assets. We observe a crowding out and erosion of domestic private capital, whose market share is shrinking from year to year. Several of the largest state-owned banks now constitute a de facto intermediate tier at the core of the banking system. We argue that the direction of ownership change in Russian banking is different from that in CEE countries.

Introduction: The primary motivation for this paper is to contribute to the study of the phenomenon of state-influenced banking in the Russian context. While the pervasiveness of the public sector in Russia is widely recognized, it is not a simple task to document it carefully. We collect empirical data to check whether the ownership structure of the banking industry has indeed shifted in favor of state-controlled players, which explains our interest in a more refined classification of state-influenced and state-controlled banks and in the techniques of state control over nominally private institutions.These issues are relevant for studies of comparative efficiency and performance of institutions of different ownership types. Karas et al. [2008] found – surprisingly – that in Russia domestic private banks are not more efficient than domestic public banks. Their study relies on public bank lists con-

Author: Andrei Vernikov

Source: Institute for Economies in Transition, Bank of Finland

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