2012年-CEPS欧洲政策研究中心_Russian_Banking_since_the_Crisis_of_1998_23页_165kb

Summary of "Russian Banking since the Crisis of 1998"

Core Content

This paper by Alfred Steinherr examines the development of the Russian banking sector since the 1998 financial crisis, highlighting the structural weaknesses and the lack of meaningful reform. The author argues that the crisis was not primarily caused by losses on treasury-bill investments, but by foreign exchange exposures, poor lending practices, and inadequate regulation. Despite the crisis, the authorities opted for a passive approach, avoiding substantial restructuring of the banking sector.

Main Points

1. Origins of the Banking Sector (1988-1998)

• The Soviet Union had a monobank system where Gosbank functioned as both central and commercial bank.
• In 1988, a two-tier system was introduced, including the Central Bank of Russia (CBR) and five "spetz" banks.
• The 1988 Law on Cooperatives allowed the creation of "zero banks" from private capital, often with state support.
• By 1992, over 1,300 licensed banks existed, many with weak governance and regulation.
• Sberbank became the largest bank and held a state guarantee, giving it a monopoly over retail deposits.

2. The 1998 Financial Crisis

• The crisis was not caused by GKO losses, but by foreign exchange imbalances, poor risk management, and lack of diversification.
• Foreign exchange exposure was the main issue, as banks borrowed in foreign currency without sufficient assets to cover them.
• Liquidity shortages and client confidence loss were critical factors.
• The CBR played a central role in mitigating losses by transferring deposits to Sberbank and injecting liquidity at below-market rates.
• The crisis had a significant impact on economic growth, despite the small size of the banking sector relative to GDP.

3. Policy Response and Restructuring

• The CBR and government avoided restructuring, which is unusual for post-crisis economies.
• ARCO (Agency for the Restructuring of Credit Organisations) was created in 1999 but had fatal flaws:
  • Undercapitalised (only 10 billion roubles).
  • Not independent; controlled by the CBR.
  • Lacked authority to close banks or enforce restructuring.
• Bankruptcy law was passed in 1999, but it protected shareholders over creditors, leading to asset stripping and violation of creditor rights.

4. Current State of the Banking Sector

• Sberbank remains the dominant player, controlling 25% of total assets and 75% of deposits.
• The sector has improved somewhat since 1998, but key issues remain:
  • Low diversification of loan portfolios.
  • Concentration of credit among a few large borrowers.
  • Weak corporate governance and poor risk management.
  • Lack of transparency in the regulatory framework.
  • Insufficient financial intermediation between savers and investors.

5. Unresolved Issues and Policy Recommendations

• Problem 1: Lack of an enabling environment – Regulatory and legal frameworks are not conducive to financial development.
• Problem 2: Banking model – The sector lacks a clear model for sustainable development.
• Problem 3: Level playing field – Sberbank's dominance distorts competition.
• Problem 4: Trust in the banking system – Public confidence remains low due to past mismanagement.
• Problem 5: Financial intermediation – Limited development of capital markets restricts funding sources.
• Problem 6: Regulatory framework – Needs to be more robust and transparent.
• Problem 7: Corporate governance – Poor governance structures persist in many banks.

Policy recommendations include:

• Introducing two types of bank licenses instead of closing many inefficient banks.
• Alternatives to Sberbank privatisation to maintain its role in serving remote areas.
• Strengthening the regulatory framework and improving transparency.
• Reforming corporate governance to ensure accountability and sound management.

Key Information

• Sberbank is state-owned (by the CBR) and holds a majority of deposits and assets.
• GKO investments were not the main cause of the crisis, as they represented less than 10% of bank assets by 1998.
• Foreign exchange exposure was the primary vulnerability, with 75% of foreign currency liabilities concentrated in the top 20 banks.
• Banking sector size is relatively small compared to GDP, but the cost of the crisis was substantial due to structural issues.
• Deposits were transferred to Sberbank during the crisis, undermining competition.
• ARCO had limited effectiveness due to lack of independence, insufficient funding, and limited powers.
• Bankruptcy law failed to protect creditors and allowed shareholder protection.
• Russian banks have high concentration of loans and low diversification, contributing to systemic risks.
• Deposit insurance was only implemented in 2004, after the crisis.

Conclusion

While some reforms have been introduced, the Russian banking sector still requires swift and substantial action to become more robust and efficient. The passive approach to restructuring, combined with regulatory shortcomings and concentration of power, has left the sector vulnerable and underdeveloped. The author calls for a more transparent and independent regulatory framework, improved corporate governance, and alternatives to the current privatization strategy to ensure long-term stability and growth.