Determinants of bank interest margins in Russia: Does bank ownership matter?

This document evaluates interest margin determinants in the Russian banking sector with a specific focus on the bank ownership structure. Employing a unique bank-level data covering Russia‚Äôs entire banking sector for the 1999-2007 period, we discover that the impact of a number of widely used determinants such as market structure, credit risk, liquidity risk and size of operations is different across state-controlled, domestic-private and foreign-owned banks. Simultaneously, the influence of operational costs and bank risk aversion is homogeneous throughout ownership groups. The outcomes overall suggest the form of bank ownership must be regarded when analyzing interest margin determinants…

In modern finance, banking institutions play a vital role in the process of financial intermediation. This holds particularly true for transition countries, where financial systems tend to be bank-based (Berglof and Bolton, 2002). Unsurprisingly, banking institutions perform a prominent, and significantly crucial role in financial intermediation in Russia. The ratio of banking-sector assets to GDP nearly doubled between 2000 and 2007, exceeded 60% as of end-2007 (Central Bank of Russia, 2008). The expansion in bank credit extended to the private sector as a share of GDP displayed an identical pattern during this time period…

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Source: Research Discussion Papers, Bank of Finland

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