The specifics of the Russian banking sector and its competitive environment

The author presumes that the banking sector efficiency largely depends on the level of competitiveness of its environment as well as the principles of concentration and centralization of a bank capital. The paper places particular emphasis on the nature of the banking sector of the economy where economic entities act within undeveloped market relations at the cost of borrowed funds. This paper states that the dominant capital in today's global economy is an "oligopolistic financial capital" that seeks to unite with the state: its economic, political and legislative power. The economy has been showing a growth of share of investments into politics, providing particular hedging of banking transactions by the state. Corporate sector's participation in this process provides a considerable competitive pressure on the bank capital. As a result, there are two features of the entire economic system functioning: 1. A shift of economic activity from the real sector to its rent-producing industries and banking and financial sector; 2. Current Russian economy, as well as the global economy, clearly have a governing and regulating core organized as a triumvirate: industrial capital, bank capital and public capital, both in economic and political aspects. This paper defines the banking services market as oligopolistic. However, it also emphasizes that based on formal features the entire banking sector largely matches the criteria of a monopolistic competition. Indeed, there is a required minimum of banks in the market - 847. But according to the official data only, 7 out of these 847 banks own 72% of all banking assets in the country. Geographic distribution of banks and their capital in Russia is unique. Moscow, the Moscow Region and St. Petersburg hold 80-85% of bank capital. The rest of the vast "periphery" accounts for only 15-20%. The establishment of the banking sector of different intensity of banking capital concentration and competitiveness has occurred in the Russian market. These figures are very high in the center and very low in the periphery. As a result, the seven abovementioned banks of development that dominate the entire economic space of the country in fact transfer financial resources from the periphery to the center, aggravating their already highly uneven regional distribution. Based on the analysis of the particular statistical material, the paper states that the banking sector of the economy has experienced a decrease in competitive potential, and with it, a slowdown in development. The banking sector that has been established in Russia is showing different levels of banking capital concentration and different degree of competitiveness in the center and the periphery. Financial resources are transferred to the center, which aggravates their already highly uneven distribution across the regions of the country. This paper represents the measurement of the monopoly power index in the banking sector using the Herfindahl-Hirschman method, although it emphasizes its relative inaccuracy. The result is impressive - 5184% with a maximum of 10,000%. It should be noted that in fact, this figure is much higher, as the author has identified the economic weight of just these seven banks, not to mention the fact that the involvement of the state in their capital significantly enhances the monopolization of the bank capital market. The conclusion emphasizes that against an overall decrease in economic efficiency, the banking sector's efficiency has been decreasing faster, either has the efficiency of state-owned banks within it.

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