The Euro and Economic Stability
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The Euro and Economic Stability

Focus on Central, Eastern and South-Eastern Europe

Edited by Ewald Nowotny, Peter Mooslechner and Doris Ritzberger-Grünwald

The Euro and Economic Stability assesses the euro area’s merits as a shelter and the merits of euro assets as a safe haven and reviews the case for rapid euro adoption from a post-crisis view. Policymakers and economists provide relevant lessons from euro area divergences for future euro area members and, more generally, from the financial crisis, while banking representatives discuss post-crisis business models of banks in the area. Last but not least, a theoretical introductory chapter fills the gap between mainstream macroeconomic modelling and real-world decision-making.
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Chapter 15: The Russian Banking Sector One Year After the Crisis Began

Nataliya Orlova


Nataliya Orlova RUSSIA AS A SAFE HAVEN Since 2000, the Russian banking sector has undergone a period of rapid growth associated with the economic expansion that resulted from rouble devaluation after the 1998 crisis. Russia’s corporate loan book demonstrated a strong average annual growth rate of 46 per cent, while retail lending grew at an average rate of 88 per cent. Growth in Russian corporate loan portfolios was primarily driven by capital inflows, which in turn were generated by high international commodity prices. With the government-managed stabilization fund sterilizing the impact of increased export-generated capital inflows, the market perception of Russia’s macro stability improved, and access to international capital markets emerged. Additionally, these capital inflows had a significant impact on the Russian banking sector. Directly, these inflows increased the Russian banking sector’s foreign debt from USD 9 billion in 2000 to USD 164 billion in 2007. Indirectly, international borrowing by Russian companies increased from USD 22 billion in 2000 to USD 249 billion in 2007, which has contributed to substantial increases in real sector liquidity. Altogether, increases in corporate accounts and foreign debt financed approximately 55 per cent of the increase in banking assets during the period of 2000–07. In spite of an absolute increase in retail savings of USD 194 billion, the retail base as a percentage of GDP remained at a modest level of 16 per cent even in 2007. With inflation outstripping nominal interest rates, the resulting negative real interest rate environment created disincentives for retail...

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