BOFIT Seminar: Laurent Weill (University of Strasbourg) - The Politics of Bank Failures in Russia

Co-authors: Zuzana Fungáčová (BOFIT), Alexei Karas (University College Roosevelt) and Laura Solanko (BOFIT)


Russia has witnessed a high number of bank failures in the last two decades. We test the hypothesis that the number of bank failures decreases in the months preceding the presidential elections. We employ monthly data on individual banks to analyze this issue during the period 2004-2019, including four presidential elections. We find that bank failures are less likely to occur in the twelve months leading up to an election. The probability of bank failure caused by financial troubles reduces before elections more than the probability of bank failure caused by money laundering. This is in line with the hypothesis that the authorities tend to delay bank failures caused by financial troubles. Country-level estimations also confirm that the number of bank failures is lower in the year preceding the election. Overall, our results indicate that the occurrence of bank failures is driven by political cycles in Russia.

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