| Abstract: | Value-added in Russian banks grew by 43 per cent while GDP declined by 32 per cent in the early years of the transition in Russia. This paper offers explanations for the unusual success of the Russian banking sector and the determinants of individual bank performance. The evidence comes from balance sheet data for 563 Moscow banks and 160 regional banks on January 1, 1995 and January 1, 1996. Important factors include the Central Bank policy of channelling low-interest directed credits to state enterprises through banks, the ability of banks to obtain large-scale interest-free deposits, and the resulting high interest rate spreads in an environment of high inflation, and the extent to which banks were formerly part of the Soviet system. |
