Political Cycles and Bank Lending in Russia

In this online seminar, Dr Fungáčová will discuss her work on bank lending patterns in Russia and their relationships with elections. State-owned banks tend to increase lending before elections for the purpose of boosting the re-election odds of incumbent politicians. Using monthly data on individual banks, the paper studies whether Russian banks increased their lending before presidential elections during 2004–2019, a period covering four presidential elections. In contrast to the literature, both state-owned and private banks increased their lending before presidential elections. The pre-election lending surge is followed by a deterioration of loan quality the following year, indicating the lending increase was not driven by higher growth prospects or some positive economic shock. Private banks are rewarded for their increase in lending before the elections by an increase of government deposits after the elections. This supports the view that the authorities in an electoral autocracy like Russia can influence lending of both private and state-owned banks for political reasons.

About the speaker

Dr Zuzana Fungáčová is a Senior Adviser in the Monetary Policy and Research Department of the Bank of Finland Institute for Emerging Economies (BOFIT) and the Editor-in-Chief of BOFIT Discussion Papers. She specialises in the Russian banking system.

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