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Efficiency of the banking sector in the Russian Federation with international comparison

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  • Caner S.
  • Kontorovich V.

Abstract

Banks, in most countries, play a crucial role in providing financial intermediation between savers and those who demand credit. Providing low cost funds is essential for investment and growth while providing savers with a good return on their investments. In order for bank intermediation to be effective in economic growth, such intermediation should be done in an efficient manner. So, an efficient functioning banking system is essential for sustained growth. The efficiency of bank intermediation in the Russian Federation has not been addressed before. In this paper, we assess the level of efficiency of the Russian banking industry using bank specific data. We estimate the level of bank efficiency using a standard stochastic frontier model. We find the efficiency level of the Russian banks low compared to international evidence on other countries. Then, we estimate the contributions of different factors that influence the level of efficiency in the Russian banking system. The factors included in the estimations are bank specific factors summarized as CAMEL variables and macroeconomic risk factors such as interest rate and exchange rate risk. We find that equity to asset ratio, ratio of non-performing loans to total loans, interest rate volatility, inflation rate volatility and real effective exchange rate volatility significantly affect intermediation efficiency of banks in the Russian Federation.

Suggested Citation

  • Caner S. & Kontorovich V., 2004. "Efficiency of the banking sector in the Russian Federation with international comparison," Higher School of Economics Economic Journal Экономический журнал Высшей школы экономики, CyberLeninka;Федеральное государственное автономное образовательное учреждение высшего образования «Национальный исследовательский университет «Высшая школа экономики», vol. 8(3), pages 357-375.
  • Handle: RePEc:scn:025886:15740209
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    Cited by:

    1. Nazin, Vladimir, 2010. "Nonparametric estimates of technical efficiency of Russian banks and crisis impact," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 20(4), pages 28-52.
    2. Nikolay Nenovsky & Martin Ivanov & Gergana Mihaylova, 2008. "The Evolution of Bulgarian Banks' Efficiency During the Twenties: A Dea Approach," Working Papers 82, Bank of Greece.
    3. Головань С.В. & Назин В.В. & Пересецкий А.А., 2010. "Непараметрические Оценки Эффективности Российских Банков," Журнал Экономика и математические методы (ЭММ), Центральный Экономико-Математический Институт (ЦЭМИ), vol. 46(3), июль.
    4. Peresetsky, Anatoly, 2010. "Bank cost efficiency in Kazakhstan and Russia," BOFIT Discussion Papers 1/2010, Bank of Finland, Institute for Economies in Transition.
    5. Subal Kumbhakar & Anatoly Peresetsky, 2013. "Cost efficiency of Kazakhstan and Russian banks: results from competing panel data models-super-1," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 6(1), pages 88-113, March.
    6. Mamonov, Mikhail & Vernikov, Andrei, 2015. "Bank ownership and cost efficiency in Russia, revisited," BOFIT Discussion Papers 22/2015, Bank of Finland, Institute for Economies in Transition.
    7. Головань С.В. & Карминский А.М. & Пересецкий А.А., 2008. "Эффективность Российских Банков С Точки Зрения Минимизации Издержек С Учетом Факторов Риска," Журнал Экономика и математические методы (ЭММ), Центральный Экономико-Математический Институт (ЦЭМИ), vol. 44(4), октябрь.
    8. repec:bof:bofitp:urn:nbn:fi:bof-201508181357 is not listed on IDEAS
    9. Fuad Aleskerov & V. Belousova & M. Serdyuk & V. Solodkov, 2008. "Dynamic Analysis of the Behavioural Patterns of the Largest Commercial Banks in the Russian Federation," ICER Working Papers - Applied Mathematics Series 12-2008, ICER - International Centre for Economic Research.
    10. Golovan, Sergei, 2006. "Factors Influencing the Efficiency of the Russian Banks Performance," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 2(2), pages 3-17.
    11. Mikhail Mamonov & Oleg Solntsev, 2009. "Foreign Banks Expansion to Russian Banking Sector: Interim Summation, Perspective Analysis Effort," Journal of the New Economic Association, New Economic Association, issue 1-2, pages 175-189.
    12. Belousova, V. & Kozyr, I., 2016. "How Do Macroeconomic Indicators Influence Banking Profitability in Russia?," Journal of the New Economic Association, New Economic Association, vol. 30(2), pages 77-103.
    13. Belousova, Veronika & Karminsky, Alexander & Kozyr, Ilya, 2018. "The macroeconomic and institutional determinants of the profit efficiency frontier for Russian banks," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 49, pages 91-114.
    14. Fungachova, Z. & Solanko, L., 2010. "Has Banks’ Financial Intermediation Improved in Russia?," Journal of the New Economic Association, New Economic Association, issue 8, pages 101-116.

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