Interbank competition in the russian banking market

Abstract

The stable development of the banking sector is closely related to interbank competition. The subject of the research is the improvement of interbank competition, which contributes to improving service quality standards, reducing costs and prices, expanding the product line, and clearing up the market from weak and unscrupulous participants. The study aims to make recommendations for improving interbank competition to ensure the stability of the country’s banking sector. The work employed the analytical methods of analysis, synthesis, comparison, graphic method. The theoretical aspects of the subject helped the authors to formulate their concept of interbank competition as the bank competition attractive sources of accumulating resources and placing them considering the customer-oriented approach and in order to ensure their stability in the banking market. The practical analysis relies on statistical data from the Bank of Russia and reflects the uneven distribution of banks across the country with the dominance of banks with state participation. The systematic and integrated approaches of the study made it possible to identify the main trends in interbank competition: monopolization, centralization, concentration of capital, federalization, and globalization. The authors conclude that a significant decrease in the number of banks against the increase in assets of state-owned banks limits interbank competition. The largest state-owned banks dominate in the country’s deposit and credit markets. The Herfindahl-Hirschman index demonstrates the sufficient importance of credit institutions in the market. Foreign banks also influence their competitiveness. The authors proposed measures aimed at strengthening interbank competition: reducing the degree of state participation in the banks’ capital by establishing a standard for the permissible state participation in the authorized capital of credit institutions; establishing equal “rules of the game” for all participants in the banking market and excluding state privileges; developing regional small and medium-sized banks through tax and financial incentives. The prospect of further research is in a more detailed study of minimizing factors that negatively affect interbank competition.