Bank supervision Russian style: Rules versus enforcement and tacit objectives

Abstract

We focus on the conflict between two central bank objectives – individual bank stability and systemic stability. We study the licensing policy of the Central Bank of Russia (CBR) during 1999-2002. Banks in poorly banked regions, banks that are too big to be disciplined adequately, and banks that are active on the interbank market enjoy protection from license withdrawal, which suggests a tacit concern for systemic stability. The CBR is also found reluctant to with-draw licenses from banks that violate the individual's deposits-to-capital ratio as this conflicts with the tacit CBR objective to secure depositor confidence and systemic stability.bank supervision; bank crisis; Russia