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Anticipating an Attack! Individual and Informational Effects of Financial Sanctions against Largest Russian Banks

Authors: Mikhail Mamonov and Anna Pestova


Abstract: In this paper, we study the effects of financial sanctions on the Russian economy at the bank level. Financial sanctions against largest Russian banks were imposed at different points in time from 2014 to 2019, thus leaving a room for yet-not-treated banks to adapt their international and domestic assets and liabilities. We use detailed monthly balance sheets, apply matching and difference-in-differences approaches and show that indeed such an informational effect of sanctions existed and pushed the banks to reduce their foreign assets and increase, rather than decrease, their foreign liabilities. Nonetheless, after the sanctions had been imposed, the treated banks further reduced their foreign assets and turned to decreasing their foreign liabilities. We show that, as a result of negative informational effects of the first portion of sanctions, yet-not-treated banks had faced panic runs of retail and corporate depositors, amounted to -5 and -10 percentage points for sectoral- and entity-sanction banks' assets. The government then stepped in and supported the banks. However, in the short run the banks were forced to reduce loans to non-financial firms by -1.8 and -7 percentage points of respectively sectoral- and entity-sanction banks' assets. With our SVAR-analysis, we show these figures imply that Russian GDP could had lost up to 2.3 percentage points, as average for 2014-2015. This number implies the sanctions had moderate though significant effect on the Russian economy.


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