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Direct and indirect state ownership on banks in Russia

Author

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  • Vernikov, Andrei

Abstract

This paper uses the banking industry case to show that the boundaries of public property in Russia are blurred. A messy state withdrawal in 1990s left publicly funded assets beyond direct reach of official state bodies. While we identify no less than 50 state-owned banks in a broad sense, the federal government and regional authorities directly control just 4 and 12 institutions, respectively. 31 banks are indirectly state-owned, and their combined share of state-owned banks’ total assets grew from 11% to over a quarter between 2001 and 2010. The state continues to bear financial responsibility for indirectly owned banks, while it does not benefit properly from their activity through dividends nor capitalization nor policy lending. Such banks tend to act as quasi private institutions with weak corporate governance. Influential insiders (top-managers, current and former civil servants) and cronies extract their rent from control over financial flows and occasional appropriation of parts of bank equity.

Suggested Citation

  • Vernikov, Andrei, 2010. "Direct and indirect state ownership on banks in Russia," MPRA Paper 21373, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:21373
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    References listed on IDEAS

    as
    1. Timothy Frye, 2002. "Capture or Exchange? Business Lobbying in Russia," Europe-Asia Studies, Taylor & Francis Journals, vol. 54(7), pages 1017-1036.
    2. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer, 2002. "Government Ownership of Banks," Journal of Finance, American Finance Association, vol. 57(1), pages 265-301, February.
    3. Vernikov, Andrei V., 2007. "Russia' banking sector transition: Where to?," BOFIT Discussion Papers 5/2007, Bank of Finland Institute for Emerging Economies (BOFIT).
    4. repec:cii:cepiei:2010-4te is not listed on IDEAS
    5. Zuzana Fungácová & Laura Solanko & Laurent Weill, 2010. "Market power in the russian banking industry," International Economics, CEPII research center, issue 124, pages 127-146.
    6. Fungáčová, Zuzana & Poghosyan, Tigran, 2011. "Determinants of bank interest margins in Russia: Does bank ownership matter?," Economic Systems, Elsevier, vol. 35(4), pages 481-495.
    7. Vernikov, Andrei V., 2007. "Russia' banking sector transition: Where to?," BOFIT Discussion Papers 5/2007, Bank of Finland Institute for Emerging Economies (BOFIT).
    8. Randall Morck & Lloyd Steier, 2005. "The Global History of Corporate Governance: An Introduction," NBER Chapters, in: A History of Corporate Governance around the World: Family Business Groups to Professional Managers, pages 1-64, National Bureau of Economic Research, Inc.
    9. Glushkova, Ekaterina & Vernikov, Andrei, 2009. "How big is the visible hand of the state in the Russian banking industry?," MPRA Paper 15563, University Library of Munich, Germany.
    10. Vernikov, Andrei, 2009. "Russian banking: The state makes a comeback?," BOFIT Discussion Papers 24/2009, Bank of Finland Institute for Emerging Economies (BOFIT).
    11. Zuzana Fungácová & Laura Solanko & Laurent Weill, 2010. "Market power in the russian banking industry," International Economics, CEPII research center, issue 124, pages 127-146.
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    Citations

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    Cited by:

    1. Panibratov, A. & Klishevich, D., 2018. "Internationalization of the State-Owned Enterprises: Evidence from Russia," Working Papers 15116, Graduate School of Management, St. Petersburg State University.
    2. Du, Julan & Li, Chang & Wang, Yongqin, 2017. "A comparative study of shadow banking activities of non-financial firms in transition economies," China Economic Review, Elsevier, vol. 46(S), pages 35-49.
    3. Kirdina, Svetlana & Vernikov, Andrei, 2010. "Эволюция Банков В Х- И Y-Экономиках [Evolution of banks in economies of X-type and Y-type]," MPRA Paper 23009, University Library of Munich, Germany.

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    Keywords

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    JEL classification:

    • P43 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Finance; Public Finance
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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