Political cycles and bank lending in Russia

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Title: Political cycles and bank lending in Russia
Author: Fungáčová, Zuzana ; Schoors, Koen ; Solanko, Laura ; Weill, Laurent
Organization: Bank of Finland
Department / Unit: Institute for Economies in Transition (BOFIT)
Series: BOFIT Discussion Papers
Series number: 8/2020
Year of publication: 2020
Publication date: 25.3.2020
Pages: 33
Subject (yso): politiikka; pankit; luotonanto; luotot; presidentinvaalit
Keywords: Bofit-kokoelma; Venäjä
JEL: G21; P34
Other keywords: bank; lending; politics; Russia
Abstract: State-owned banks tend to increase lending before elections for the purpose of boosting the reelection odds of incumbent politicians. We employ monthly data on individual banks to study whether Russian banks increased their lending before presidential elections during 2004–2019, a period covering four presidential elections. In contrast to the literature, we find that both state-owned and private banks increased their lending before presidential elections. This result stands for all loans, as well as separately for firm and household loans. The pre-election lending surge is followed by a deterioration of loan quality the following year, indicating the lending increase was not driven by higher growth prospects or some positive economic shock. The effect is substantially greater for large banks and banks more involved in lending activities. Our main finding that all types of banks in Russia increase their lending before presidential elections supports the view that the authorities in an electoral autocracy like Russia can influence lending of both private and state-owned banks for political reasons.
Table of contents: Abstract .. 4 1 Introduction .. 5 2 Presidential elections and the Russian banking sector .. 7 3 Data and methodology .. 9 4 Results .. 10 4.1 Main estimations .. 11 4.2 Is the increase in lending driven by loan demand? .. 12 4.3 Is the pre-election increase in bank lending focused on a specific type of lending or bank? .. 13 4.4 Robustness checks .. 17 5 Conclusions .. 18 References .. 19 Tables .. 21
Rights: https://helda.helsinki.fi/bof/copyright

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