The Sanctions Financial Channel Impact on the Russian Banking Sector

The main goal of the study is to assess the financial sanctions’ impact on the Russian banking sector. The work consists of two parts. The first part is devoted to the consideration of the main theoretical approaches to the explanation of the sanctions concept, possible classifications and methods of measuring the effectiveness of economic restrictions. It also presents the stages of the economic sanctions implementation against Russia and the analysis of changes that have occurred in the Russian banking system after their application. The second part contains a description of the data, the methodology of the econometric study, as well as the results obtained on the basis of the developed model, and their interpretation. The sample of the study is presented by a set of financial indicators of 8 banks which are under sanctions and 10 which are not, similar in size of assets for comparison. The chronological framework of the study covers the period from 1 January 2014 to 1 January 2019. Through the construction of models based on the banks data, it was proved the direct impact of sanctions on the net profit and the opposite effect on the amount of banks formed reserves. According to the results of the first model, the banks financial result is directly dependent on the net interest margin, profitability of foreign exchange operations, the value of total assets, the return on assets and liquidity ratios (H2 and H3), and the feedback is observed for indicators of the level of the resources stability and reserves for the possible losses. The main result of this model is the importance of the impact of economic sanctions on the banks net profit, indicating that there is a significant difference in the value of the resulting indicator for the credit institutions which are under sanctions and ones which are not. On the contrary, the nominal exchange rate of the US dollar against the ruble is an insignificant indicator and its change does not affect the dynamics of the net profit. In the second model, where the resulting indicator is the value of the formed reserves, the exchange rate is a significant indicator, as well as the variable, indicating the bank inclusion in the sanctions lists. The results of the model show varying degrees of influence of these dependent variables on the final indicator.