Iftekhar Hasan: Institutional development ensures banking system stability

The HSE has held the fourth annual workshop ‘Banking in Emerging Markets: Challenges and Opportunities’, organized by National Research University Higher School of Economics (CInSt HSE) with the support of the Bank of Finland Institute for Economies in Transition (BOFIT).

Video of workshop

Iftekhar Hasan, from Fordham University, was invited by the HSE’s Center for Institutional Studies to be the keynote speaker. Iftekhar Hasan is the E. Gerald Corrigan Chair in International Business and Finance at Fordham University's Schools of Business and serves as the scientific advisor at the Central Bank of Finland. He is the managing editor of the Journal of Financial Stability and has over 200 publications to his name.

At the HSE event, he talked about the role institutional change plays in transition economies. His research shows that reforms to the legal system and corporate governance, and liberalization of the banking sector significantly lower risk and improve stability in the banking system. This effect is stronger for domestic banks (than for international banks), and the reforms improve the quality of bank income (quality being reflected in the possibility to predict future income and financial flows based on current income).

Academics from Russia, France, the Netherlands, Belgium, Turkey and the Czech Republic all gave presentations. Dr. Alexei Karas (University College Roosevelt) gave a joint presentation with Laura Solanko (Bank of Finland) about how changing interest rates and the exchange rates impact bank behavior. Applying data from Russian lending institutions, the authors showed the key role a breakdown in the balance of terms and currencies plays in fluctuating bank profits.

Ata Can Bertay (Ozyegin University) gave an apposite analysis of the links between financial stability, macroeconomic growth and the securitization of the economy. He feels that the level of securitization is negatively linked to growth, and that there is a negative connection between the level of securitization and bank stability.

The HSE’s Irina Andrievskaya outlined research she carried out with Maria Semenova, also at the HSE. In this research, the authors analyze the influence of information disclosure on competitiveness and concentration levels in the banking system. As the research shows, the higher the demands for information disclosure, the lower the bank concentration levels, while the impact on the level of competition is not strongly expressed. More detailed information about the seminar can be found on the HSE Center for Institutional Studies website (in Russian).