Russian banks face market discipline as deposit interest rates soar.
The study looked at how different interest rates on private deposits in Russian banks are influenced by the banks' financial health. It also examined whether a deposit insurance program introduced in 2005 affected these rates. The results show that Russian depositors demand higher interest rates from banks with risky financial practices, indicating a form of market discipline. This discipline appears to be stronger in Russia compared to developed countries. Additionally, the study found that banks took on more risks after the introduction of deposit insurance.