13.12.2011
Thursday
at 10.30
Zuzana Fungáčová (BOFIT) and Petr Jakubík (ECB):
Bank stress tests as an information device for emerging markets: the case of Russia
Abstract
The recent financial crisis did not dramatically change the structural features of the Russian banking sector. The state still plays a decisive role and the banking sector remains fragmented and relatively small when accounting for the size of the Russian economy. Our analysis points to certain weaknesses in the Russian banking sector related to the high sensitivity of the Russian banking sector capital adequacy ratio to the economic cycle. This sensitivity not only reflects the adverse macroeconomic scenario, but also the fact that as the economy recovers from the current crisis, credit growth can put downward pressure on capital adequacy ratio (CAR) since relatively high-risk profile of the Russian banks’ credit portfolios would result in an increase of risk weighted assets (RWA). Banks would then respond by tightening credit conditions. Consequently, the economic recovery could be dampened as access to external financing would worsen especially for medium and small firms. However, taking into consideration Russia’s low public debt-to-GDP ratio, the government would have sufficient fiscal space to fully recapitalise potential problematic banks under two considered scenarios in our stress tests exercise (baseline, adverse). Nevertheless, the capacity of the Russian banking sector to finance an expected economic recovery seems to be limited. That is why many large Russian corporations rely on financing obtained from global markets.
BOFIT seminars
The seminars are open to all economists interested in the subject areas covered.
You need to pre-register for the seminar with
Ms Noora Soikko (firstname.lastname@bof.fi, phone + 358 10 831 2268).
Seminar will be held at Rauhankatu 19, 3rd floor seminar room (arrive at the Bank's Rauhankatu 19 entrance, from where you will be escorted to the BOFIT seminar room).