Scandinavian Working Papers in Economics

Working Paper Series,
Sveriges Riksbank (Central Bank of Sweden)

No 205: Bank supervision Russian style: Evidence of conflicts between micro- and macroprudential concerns

Sophie Claeys () and Koen Schoors ()
Additional contact information
Sophie Claeys: Research Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Koen Schoors: CERISE, Postal: Ghent University, Tweekerkenstraat 2, BE-9000 Ghent, Belgium

Abstract: Supervisors sometimes have to manage both the micro- and macro- prudential dimensions of bank stability. These may either conflict or complement each other. We analyze prudential supervision by the Central Bank of Russia (CBR). We find evidence of micro-prudential concerns, measured as the rule-based enforcement of bank standards. Macro-prudential concerns are also documented: Banks in concentrated bank markets, large banks, money center banks and large deposit banks are less likely to face license withdrawal. Further, the CBR is reluctant to withdraw licenses when there are “too many banks to fail”. Finally, macro-prudential concerns induce regulatory forbearance, revealing conflicts with micro-prudential objectives.

Keywords: Prudential Supervision; Bank Stability; Systemic Stability

JEL-codes: E50; G20; N20

42 pages, March 1, 2007

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