Market power in the russian banking industry

The aim of this paper is to analyze bank competition in Russia by measuring the market power of Russian banks and its determinants over the period 2001-2006 with the Lerner index. We find that bank competition has only slightly improved during the period studied. The mean Lerner index for Russian banks is of the same magnitude as those observed in developed countries, which suggests that the Russian banking industry is not plagued by weak competition. Furthermore, we find no greater market power for state-controlled banks nor less market power for foreign-owned banks. Finally, our analysis of the determinants of market power enables the identification of several factors that influence competition, including market concentration and risk as well as the nonlinear influence of size.