Advertisement

A path to financial integration: steps for the Eurasian Economic Union

  • Olga PakEmail author
  • Kenji Iwata
Original Paper

Abstract

This paper analyzes the banking systems of the founding states of the Eurasian Economic Union (EAEU) to indentify discrepancies that may hinder the establishment of a single market for financial services. Practical contributions are derived from two dimensions. First, a comparison of the EAEU banking sectors’ structures prior to integration reveals common features such as high concentration, low level of foreign ownership and dominance of state-controlled banks. Significant heterogeneity in the development of the EAEU banking sectors, however, is observed. We expect changes towards reinforced Russian banks’ power in smaller EAEU member states. Intense cross-border competition will drive a further consolidation of domestic credit institutions and decrease the market share of state banks. Second, harmonization of banking regulations and supervisory practices is a critical starting point for moving to a single market for financial services. We report some divergences in the implementation of Basel III standards at the national levels. Russian banks’ regulatory framework is more advanced and compliant with international requirements for capitalization and liquidity. Governance and information disclosure in the EAEU banking sectors, however, remain weak. Unless regulation is strengthened and appropriate prudential tools to control bank risks are properly set, financial integration may facilitate spillover of risks across national borders and threaten the financial stability in the EAEU.

Notes

Compliance with ethical standards

Conflict of interest

The authors declare that they have no conflicts of interest.

References

  1. Aalto P, Forsberg T (2016) The structuration of Russia’s geo-economy under economic sanctions. Asia Eur J 14:221–237.  https://doi.org/10.1007/s10308-015-0446-6 CrossRefGoogle Scholar
  2. Baele L, Ferrando A, Hordahl P, Krylova E, Monnet C (2004) Measuring financial integration in the Euro area. European Central Bank Occasional paper series #14. https://www.ecb.europa.eu/pub/pdf/scpops/ecbocp14.pdf. Accessed 10 August 2017
  3. Basel Committee on Banking Supervision (2010) Basel III: a global regulatory framework for more resilient banks and banking systems. Bank for International Settlements. https://www.bis.org/publ/bcbs189.htm. Accessed 12 March 2017
  4. Basel Committee on Banking Supervision (2012) A framework for dealing with domestic systemically important banks. Bank for International Settlements. https://www.bis.org/publ/bcbs233.pdf. Accessed 1 April 2017
  5. Basel Committee on Banking Supervision (2013) Basel III: the liquidity coverage ratio and liquidity risk monitoring tools. Bank for International Settlements. https://www.bis.org/publ/bcbs238.htm. Accessed 5 April 2017
  6. Basel Committee on Banking Supervision (2014a) Basel III: leverage ratio framework and disclosure requirements. Bank for International Settlements. https://www.bis.org/publ/bcbs270.htm. Accessed 5 April 2017
  7. Basel Committee on Banking Supervision (2014b) Basel III: the net stable funding ratio. Bank for International Settlements. https://www.bis.org/bcbs/publ/d295.htm. Accessed 8 April 2017
  8. Basel Committee on Banking Supervision (2015) Revised Pillar 3 disclosure requirements. Bank for International Settlements. https://www.bis.org/bcbs/publ/d309.htm. Accessed 15 April 2017
  9. Basel Committee on Banking Supervision (2016) Regulatory consistency assessment programme. Assessment of Basel III risk-based capital regulation—Russia. Bank for International Settlements. https://www.bis.org/bcbs/publ/d357.pdf. Accessed 15 April 2017
  10. Cameron F (2010) The European Union as a model for regional integration. Council on Foreign Relations, International Institutions and Global Governance Program, Working paper. file:///C:/Users/olgapak/Downloads/IIGG_Eurozone_WorkingPaper_Cameron%20(1).pdf. Accessed 21 June 2017Google Scholar
  11. European Commission (2009) The high-level group on financial supervision in the EU. Report chaired by Jacques de Larosiere. http://ec.europa.eu/internal_market/finances/docs/de_larosiere_report_en.pdf. Accessed 12 June 2017
  12. European Commission (2015) Completing Europe’s Economic and Monetary Union. Report chaired by Jean-Claude Juncker. Five presidents' report. https://ec.europa.eu/commission/sites/beta-political/files/5-presidents-report_en.pdf. Accessed 3 June 2017
  13. Financial Stability Institute (2015) FSI Survey Basel II, II.5 and III implementation. Bank for International Settlements. https://www.bis.org/fsi/fsiop2015.pdf. Accessed 2 May 2017
  14. Giannetti M, Guiso L, Jappelli T Padula M, Pagano M (2002) Financial market integration, corporate financing and economic growth. European Commission, European Economy, Economic papers #179. http://ec.europa.eu/economy_finance/publications/pages/publication1660_en.pdf. Accessed 15 August 2017
  15. Gordon A, Lazarev I (2016) Stages for formation of the common financial market of the EAEU. Money and Credit 12:39–42Google Scholar
  16. International Monetary Fund (2014) The Republic of Kazakhstan. Financial system stability assessment. IMF country report #14/258.Google Scholar
  17. International Monetary Fund (2016) Financial Sector Assessment Program (FSAP) for the Russian Federation. https://www.imf.org/external/pubs/ft/scr/2016/cr16303.pdf. Accessed 22 April 2017
  18. Jappelli T, Pagano M (2008) Financial market integration under EMU. European Commission, European Economy, Economic Papers 312/March 2008. http://ec.europa.eu/economy_finance/publications/pages/publication12323_en.pdf. Accessed 15 August 2017
  19. Jarosiewicz A, Fisher E (2015) The Eurasian Economic Union—the more political, less economic. Center of East European Studies, Commentary #157:2–3. https://www.osw.waw.pl/en/publikacje/osw-commentary/2015-01-20/eurasian-economic-union-more-political-less-economic. Accessed 20 August 2017
  20. Konopelko A (2017) Eurasian economic union: a challenge for EU policy towards Kazakhstan. Asia Eur J 16(1):1–17.  https://doi.org/10.1007/s10308-017-0480-7 CrossRefGoogle Scholar
  21. London Economics (2002) Quantification of the macro-economic impact of integration of EU financial markets. Final report to the European Commission—directorate-general for the internal market by London Economics in association with PricewaterhouseCoopers and Oxford Economic Forecasting. http://londoneconomics.co.uk/wp-content/uploads/2011/09/103-Quantification-of-the-Macro-economic-Impact-of-Integration-of-EU-Financial-Markets.pdf. Accessed 13 October 2017
  22. Monti M (2010) A new strategy for the single market. Report to the President of the European Commission. http://ec.europa.eu/internal_market/strategy/docs/monti_report_final_10_05_2010_en.pdf Accessed 12 October 2017
  23. Volz U (2004) European financial integration and the financing of local businesses in the new EU member states. European bank for Reconstruction and Development Working paper # 89. http://www.ebrd.com/downloads/research/economics/workingpapers/wp0089.pdf. Accessed 15 October 2017

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Bang College of BusinessKIMEP UniversityAlmatyKazakhstan
  2. 2.Faculty of EconomicsKyushu UniversityFukuokaJapan

Personalised recommendations