Importance The research focuses on sources and processes of strengthening capital in the Russian banking sector during financial volatility. Objectives The research aims at identifying the specifics and drivers of growth in capital of credit institutions at the current stage. Methods Using econometric and statistical methods, I analyzed the absolute and relative indicators that describe trends in aggregate capital of the banking sector and its sources. The research relies upon a systems, logic, correlation and regression analysis, methods of comparison and generalization. Results I found common patterns seen when sources of bank capital strengthening change during financial crises. Retained earnings and relevant funds were proved to have been the main sources of strengthening capital of the Russian banks for the recent ten years. Subordinated loans were found to be an important source for strengthening capital for the Russian banks, meanwhile most of the other sources are sensitive to worsening macroeconomic conditions. Conclusions and Relevance If Russia adopts Basel III framework on common equity and additional banking capital, and promoting countercyclical buffers, it will impede the Russian banks' capital strengthening and solving the capitalization issue.
Keywords: capital, source, profit, bank, Basel III
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