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Svetlana Ageeva and Anna Mishura

This chapter examines the role of the Russian banking system in allocating financial resources across national regions. The past two decades have witnessed declines in the number of Russian banks. The outcome of this is troubling as it has resulted in a Moscow-centred and state-orientated banking system where large banking networks thrive at the expense of private smaller and regional banks. Information from the Central Bank of Russia (CBR) is analysed to highlight the role of Moscow-based banking networks in lending to regional economies outside Moscow. From this it may be inferred that the inequalities of the Russian economy are reinforced by the banking system, particularly because it is a system in which large network banks, headquartered mainly in Moscow, provide a regular flow of financial resources from the capital to meet the lending needs of other regions. Effects of ‘flight to home’ and ‘flight to quality’ transfers following the crisis period after 2014, highlight the vulnerabilities of small and medium-sized enterprises (SMEs).