Fungáčová & Herrala & Weill: Bank ownership and credit supply during the financial crisis: evidence from Russia

Abstract
The aim of this study is to examine how bank ownership influences credit supply during the financial crisis. This issue is crucial for understanding the implications of foreign and state ownership of banks as former literature suggests that banks can have a different lending behavior in troubled times depending on their ownership. We investigate this issue for Russia, where banking sector consists of state-controlled banks, foreign-owned banks and domestic private banks. Employing an exhaustive dataset on Russian banks, we analyze the evolution of credit supply during the recent financial crisis. We develop an original approach to estimate credit supply, which is based on stochastic frontier analysis. We find evidence that bank ownership has exerted an impact on credit supply during the financial crisis. While the crisis caused an overall decrease in credit supply, this reduction was greater for foreign banks and lower for state-controlled banks relative to domestic private banks. Thus, we find support for the hypothesis of “lack of loyalty” of foreign banks and for the view that the objective function of state-controlled banks leads them to support the economy during economic downturns.