IN THE RUSSIAN BANKING:
Institute of Economics - Russian Academy of Sciences (RAS)
firstname.lastname@example.org , www.kirdina.ru
Higher School of Economics - National Research University;
Institute of Economics – RAS
Has post-Soviet transformation led to an irreversible
change in the intrinsic model of financial
intermediation and credit allocation?
What was the impact of the financial crisis?
Financial intermediation reforms in post-Soviet
Russia (1991- …)
International context: Russia compared to Central
& Eastern Europe and China
Interpretation based on the theory of institutional
Stage 1 (from 1991 until 1998): State
withdrawal from financial intermediation
Appropriation of state-owned banks by private
persons, mainly insiders;
New private banks emerge;
Foreign banks establish their subsidiaries in
Stage 2 (from 1999 until 2009): State re-
engagement with financial intermediation
State-controlled banks increase their market share
Private domestic banks are crowded out
State regulation of banking becomes more
comprehensive and intense
During the crisis the government steps into the
banking industry more directly
Development and policy lending expand.
Breakdown of Russian banking
60% private domestic
Factors that led to state re-engagement
in the banking sector
Lack of private capital, insufficient depth of financial
Fragility and volatility of the credit system
Popular mistrust towards private banks
Private banks pursued only short-term strategies, failed
to finance innovation
Private banks did not display superior efficiency
compared to state-owned banks
Huge social cost of keeping private banks afloat.
Stage 3 (from 2010 - ?): New wave of state
The number (not a share) of state-controlled banks falls
(divestment; merger; fraud)
Market share of state-controlled banks stops growing
Privatization program is announced.
Market shares of state-controlled banks:
Russia Vs. CEE
20 Czech R.
China, banking system, 2007
Share, % Share, % of loans Share of state
Bank type of assets to non-financial authorities in
companies equity, %
Policy banks 8.2 14.7 100*
State-owned commercial 53.4 47.2 100*
Joint-stock commercial 16.9 17.8 > 70*
Urban commercial banks 6.0 6.3 100**
Rural commercial banks 1.2 1.3 100**
Foreign banks 1.9 2.0 -
Urban credit cooperatives 0.4 0.5 > 75**
Rural credit cooperatives 8.1 9.8 > 75**
Others 3.8 0.4 …
Total 100 100
* central authorities; ** local authorities
Key to interpretation: Institutional matrix
Existing theory offers only partial explanation to
government banking phenomenon.
Development theory (need to finance development in countries
with scarce private capital)
Political theory (politicians use state-controlled banks to extract
rent, to keep power, etc.).
Institutional matrices theory (or Х-Y-theory) offers a
deeper and broader perspective
HUMAN SOCIETY……is seen as a social system, as
multiple inter-related social systems, within the main
“sociological co-ordinates” being economy, politics and
ideology. These value spheres are strongly interrelated
morphologically as parts or sides or components of one
X- matrix versus Y-matrix
X- and Y-institutions
in the economy and their functions
Functions of X- Y-
institutions institutions institutions
1. Fixing of goods (property Supreme conditional Private ownership
rights system) ownership
2. Transfer of goods Redistribution Exchange
3. Interactions between Cooperation Competition
4. Labor system Employed (unlimited Contract (short and
term) labor medium term) labor
5. Feed-back signals Cost limitation Profit maximization
(effectiveness indexes) (Х-efficiency) (Y-efficiency)
Combinations of X- and Y-matrices
X – dominant Y – dominant
Y- complementary X – complementary
(Russia, China, most Latin (European and North American
American & Asian countries) countries)
X-matrix institutions have historically prevailed in Russia.
Banking has always been dominated by the state.
Y-matrix institutions play complementary, auxiliary role by
filling gaps left by redistribution
An attempt to replace centralized allocation of resources by
market-led mechanisms failed. Private banks proved to be
unfit; they destroyed value instead of creating it.
Growth of market share of state-owned banks reflects
recovery of the X-matrix institutions.
Central and Eastern Europe:
In CEE countries the institutions of Y-matrix used to
After the WW2, X-matrix institutions were imposed by
After the fall of the Berlin Wall and the waning of USSR
influence, the “normal” institutional matrix recovered
State-owned banks were privatized to foreign direct
investors. Resource are allocated in a decentralized
way, no directed nor policy lending takes place.
Like in Russia, X-matrix institutions have historically
Unlike in Russia, the dominant matrix remain intact.
Reforms aim at gradually complementing X-matrix
institutions by Y-matrix institutions
State-controlled banks stand at the core of the financial
system. The government tries to make them more
competitive and efficient. But directed political lending
prevails over individual market decisions regarding
Market (Y-matrix) institutions grow in Russia, but they
remain complementary to the redistributive (X-matrix)
Financial system again becomes more centralized. The
state plays an increasingly important role in resource
allocation, through government banking and other
The financial crisis overturned the balance in favor of the
institutions of Х-economy. It streamlined the banking
sector with its longer-term trends.
Kirdina S. G. (2001), Institutional Matrices and Development
in Russia (2nd edition), Novosibirsk (in Russian).
Kirdina S. (2001), Fundamental Difference in the
Transformation Process between Russia and East European
Countries // Berliner Osteuropa Info, No.16.
Kirdina S. (2010), Institutional matrices theory, in: Sociological
Dictionary, Moscow (in Russian).
Vernikov A., Kirdina S. (2010). Evolution of banking in X- and
Y-economies /Evolutionary economics and finances:
innovation, competition and economic growth. Moscow, 2010
Vernikov A. (2010) Russian banking: A comeback of the state.
- Economics Working Paper No.104, UCL SSEES Centre for
Comparative Economics, London.
Vernikov A. (2011), Government banking in Russia:
Magnitude and new features, IWH Discussion Papers.
August, No. 13.