BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 21/2008:
Risk-taking by Russian banks: Do location, ownership and size matter?
Zuzana Fungacova ()
and Laura Solanko
Abstract: The Russian banking sector has experienced enormous growth
rates during the last 6-7 years. The rapid growth of assets has, however,
contributed to a decrease in the capital adequacy ratio, thus influencing
the ability of banks to cope with risk. Using quarterly data spanning from
1999 to 2007 on all Russian banks, we investigate the relationship between
bank characteristics and risk-taking by Russian banks. The analysis of
financial ratios reveals that, on average, the risk levels are still below
those observed in Central and Eastern Europe. Combining the group-wise
comparisons of financial ratios and the results of insolvency risk analysis
based on fixed effects vector decomposition, three main conclusions emerge.
First, controlling for bank characteristics, large banks have higher
insolvency risk than small ones. Second, foreign-owned banks exhibit higher
insolvency risk than domestic banks and large state-controlled banks are,
unlike other state-controlled banks, more stable. Third, we find that the
regional banks engage in significantly more risk-taking than their
counterparts in Moscow.
Keywords: bank risk-taking; banks in transition; Russia; (follow links to similar papers)
JEL-Codes: G21; G32; P34; (follow links to similar papers)
41 pages, November 22, 2008
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