Adherence to high standards of corporate governance in the banking sector can reinforce the resilience of the banking system. However, existing corporate governance practices do not help curb the risks banks take.
Bad debts can be both a consequence of the borrower’s reduced financial circumstances and an instrument of unfair banking. Each of these problems has its regulatory solution but the key principle should be market responsibility of the owners and managers.
A sound banking system, a moderate bad debt level, prompt recognition of the problem which bad debts pose and dealing with them effectively, are essential preconditions of not only financial stability and depositor protection but also of economic growth.
Due to the small size and volatility of the Russian money market, Russian entities choose two extremes as benchmarks for their interest rates – the key interest rate and the MosPrime rate, at which banks themselves do not lend to one another.
Five years ago, half of all Russian banks provided a full range of banking services to companies and households; now only one in three do. Banks are opting to specialize more narrowly or to move away from clear business models altogether.