The Impact Of Monetary Policy On The Banks' Risk-Taking In Russia In The Period 2000-2016

The effective improvement of a modern market economic system in the framework of the monetarist idea inside with a well-operating banking sector would be only possible through the implementation of a flexible monetary policy which is pursued by the Central Bank.The systemic decisions of the Central Bank of the Russian Federation promote and endorse the regulation of volumes of the money supply,thus allowing it to have control over the management of the inflationary processes and the economic growth,thereby affecting the balance of the payments.The CBR has the widest authority and complete independence in the matter of choosing methods and measures for the monetary and credit regulation of the country's economy within the framework of the current legislation.For the Russian monetary policy,the interest rate and refinancing rate are the key mechanisms.With the aid of the fluctuation of those key margin quotes,the CBR has a power on the activities of commercial banks regarding their risk-taking behavior.The present study examines the degree of impact of the monetary policy on bank risk-taking by using bank-level panel data from 50 main Russian domestic bank risk-taking matters by using annual over the period 2000-2016.The main finding shows that the expansionary monetary policy increases the resources of commercial banks by supplying them with more money at low rates,as a result,encourages them to expand their capitalization and profitability,which in turn leads to the expansion of the banks' appetite to take a risk.Additionally,the results,obtained from the alternative model applied through HP filter,indicates that different monetary policy cyclical behavior has influences differently on banks'lending appetite,while the smoothing of key proxies of the expansionary monetary policy is highly correlated with banks' risk indicators.Risk taking is encouraged by the Central Banks'policy when interest rates are set too low for too long,in the ascending period,can change the perception of the risks in banks.Finally highlighting the ownership structure of the Russian bank lending behavior,our result shows that the quality of loans is lower and default of risk is higher in state-owned banks than private branches.But currently,ongoing sanctions against the Russian Federation leads the decrease of the commercial institutions and despite the ownership structure,the banking sector is highly dependent on monetary policy regulations.The extent of the influence of the monetary policy variables on these banks' desires towards risks is measured through the system of the GMM estimator.