The Effect of New Way of Financing for Developers on Risk and Profitability of Banks: Moscow Oblast Example

The involvement of banks in lending to construction industry is a promising area of cooperation between credit institutions, buyers and construction companies. However, with an insufficient level of management and risk-management, the excessive credit expansion can increase the number of non-performing loans on banks' balances, which would finally lead to the growth of risk level, as well as the decrease in efficiency and stability of banking operations. This study applies methods of statistical analysis to assess the impact of introduction of the new form of financing for developers on banking sector's risks and profitability in Moscow region in the period from 2016 to 2020. The study outlines problems and prospects for the development of the new mechanism involving the use of escrow accounts in the Russian market. We also tried to answer the following question in this research: "Have banks benefited from the transition to project financing?" Information database for this study included data presented by "Mobile" information agency, banks' quarterly reports, figures disclosed by the Federal State Statistics Service and the Bank of Russia, as well materials from scientific publications.