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Rapid loan growth in Russia : A lending boom or a permanent financial deepening?

  • Havrylchyk, Olena

In this paper we look at a number of factors surrounding the sharp increase in lending in Russia. First of all, we discuss the sources of loan growth and factors that have triggered rapid loan growth. Second, we consider the loan portfolio quality, singling out Sberbank and other state banks which could be prone to directed lending and could be subject to lax supervision. Third, we address the potential problem associated with the high exposure of banks to large borrowers and related parties, and concentration of loans to the oil and gas industry. Our analysis shows that rapid loan growth was preceded by strong economic growth and is accompanied by increased investments in fixed assets. In 2003, loan growth was further boosted by the rise in cross-border lending and international bond issuances. The short-term nature of this foreign debt is one of the sources of vulnerability for the Russian banks. The quality and the structure of the loan portfolio has improved significantly in the last years, but the real risk may be hidden because of the negative real interest rates, high growth of loans and lack of transparency. Future loan growth will mainly depend on the success of the current banking reform.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 20997.

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Date of creation: Nov 2004
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Handle: RePEc:pra:mprapa:20997
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  1. James R. Barth & Gerard Caprio, Jr. & Ross Levine, 2002. "Bank Regulation and Supervision: What Works Best?," NBER Working Papers 9323, National Bureau of Economic Research, Inc.
  2. R. T.A. de Haas & I. P.P van Lelyveld, 2004. "Foreign Bank Penetration and Private Sector Credit in Central and Eastern Europe," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 3(2), pages 125-151, August.
  3. Cull, Robert, 1998. "How deposit insurance affects financial depth : a cross-country analysis," Policy Research Working Paper Series 1875, The World Bank.
  4. Aditya Narain & Pau Rabanal & Steen Byskov, 2003. "Prudential Issues in Less Diversified Economies," IMF Working Papers 03/198, International Monetary Fund.
  5. Asli Demirgüç-Kunt & Enrica Detragiache, 1997. "The Determinants of Banking Crises; Evidence From Developing and Developed Countries," IMF Working Papers 97/106, International Monetary Fund.
  6. Levine, Ross & Zervos, Sara, 1996. "Stock markets, banks, and economic growth," Policy Research Working Paper Series 1690, The World Bank.
  7. Gourinchas, Pierre-Olivier & Landerretche, Oscar & Valdés, Rodrigo, 2001. "Lending Booms: Latin America and the World," CEPR Discussion Papers 2811, C.E.P.R. Discussion Papers.
  8. Ivanna Vladkova Hollar & Giovanni Dell'Ariccia & Carlo Cottarelli, 2003. "Early Birds, Late Risers, and Sleeping Beauties; Bank Credit Growth to the Private Sector in Central and Eastern Europe and in the Balkans," IMF Working Papers 03/213, International Monetary Fund.
  9. Beck, Thorsten & Lundberg, Mattias & Majnoni, Giovanni, 2006. "Financial intermediary development and growth volatility: Do intermediaries dampen or magnify shocks?," Journal of International Money and Finance, Elsevier, vol. 25(7), pages 1146-1167, November.
  10. Abdur Chowdhury, 2003. "Banking reform in russia: winds of change?," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 6(2), pages 89-103.
  11. William Tompson, 2004. "What kind of 'financial safety net' for Russia? Russian Banking reform in comparative context," Post-Communist Economies, Taylor & Francis Journals, vol. 16(2), pages 115-135.
  12. World Bank, 2002. "Building Trust : Developing the Russian Financial Sector," World Bank Publications, The World Bank, number 15225.
  13. Lubin, David, 2002. "Bank Lending to Emerging Markets: Crossing the Border," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
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