Optimum Structure of the Banking Market: How Many Banks Are Necessary for Russia?

Abstract

The number of classical banks in the world has reduced. In the majority of countries the number of banks does not exceed 200. The uniqueness of the Russian banking sector is that in this respect it takes the third place in the world after the USA and Germany. The paper reviews the conclusions of the economic theory about the optimum structure of the banking market. The empirical analysis shows that the number of banks in a country is influenced by the size of its territory, population number and GDP per capita. Our econometric estimate is that the equilibrium number of banks in Russia should be in a range of 180-220 units.

The territorial organization factors of the banking sector of Siberia

“…No correlation was found to occur between the size of the territory and the number of bank offices in the Siberian regions, i.e. such a correlation as identified by S. Moiseev [14] for the countries of the world is not always manifest at the domestic level.…”

“…S. Moiseev [14] assessed the influence of the economic (inflation, GDP per capita, and the ratio of total assets of the banking sector to GDP), demographic (population size) and geographical (area of the territory) indicators on the number of banks in the country without regard for the branch structure. He analyzed data on the activities of credit establishments from more than 50 countries of the world, including from all countries of Europe, CIS and Baltic region.…”

Forecasting the optimal structure of the Russian banking system

“…Moiseev's opinion [6], based on the interna tional regularities of the development of banking sys tems, the equilibrium (optimal) number of banks in Russia should be within 180-220. At the same time, the problem of forecasting the optimal structure of a bank ing sector (which makes a system object stable and ensures the synergic effect) were not considered in that paper.…”