Financial Analytics: Science and Experience
 

Abstracting and Indexing

РИНЦ
Referativny Zhurnal VINITI RAS
Worldcat
Google Scholar

Online available

EBSCOhost
Eastview
Elibrary
Biblioclub

Archiving

Cyberleninka (12 month OA embargo)

Project finance issues in Russia: The specifics of provisions for possible losses of stakeholder banks

Vol. 12, Iss. 3, SEPTEMBER 2019

Received: 22 January 2019

Received in revised form: 14 February 2019

Accepted: 3 March 2019

Available online: 30 August 2019

Subject Heading: RELIABILITY OF FINANCIAL INSTITUTIONS

JEL Classification: G21, G24, G28

Pages: 352–368

https://doi.org/10.24891/fa.12.3.352

Ezangina I.A. Volgograd State Technical University (VSTU), Volgograd, Russian Federation
ezanginaia@rambler.ru

ORCID id: not available

Zakharova N.D. Volgograd State Technical University (VSTU), Volgograd, Russian Federation
zndvstu@mail.ru

ORCID id: not available

Subject Project finance is a promising tool for generating business and national resources, incrementing the income of financial institutions. It is especially difficult for banking institutions that offer investment products to make provisions for project finance deals.
Objectives The study updates the definition of provisions for losses in terms of project finance. We also analyze the specifics and issues of its formation, search for promising aspects that the State and business should focus on in their activities in order to create an effective mechanism for making provisions for possible losses.
Methods The study is based on the systemic and functional approach, general methods of abstraction, analysis and synthesis.
Results The article demonstrates that investors (banks) are exposed to higher and special credit risks associated with project finance deals because the future cash flow will work as the collateral value and a new SPV has no credit history. We describe the mechanism for making provisions for possible credit losses and respective debts as part of project finance. We analyze portfolios of project finance deals and provisions with respect to some banks. The article shows what impedes further improvements in the procedure for making provisions for project finance deals.
Conclusions and Relevance It is advisable to depart from the traditional regulatory practice and legislative approval of the technique for making credit risk provisions as part of project finance. The technique should accommodate for three basic components, i.e. financial sustainability of an SPV, the State's stake, private (banking) co-finance mechanism. The findings can be relevant to the regulatory practice of the State for controlling and mitigating costs that credit institutions incur to make reserves.

Keywords: loss provision, project finance, financial position, project finance factory, investment (credit) risk

References:

  1. Peshchanskaya I.V. [Reserves in the bank risk management system]. Elektronnyi nauchnyi zhurnal, 2016, no. 3, pp. 381–392. (In Russ.) URL: Link
  2. Abduragimova R.M. [The procedure for creating reserves for possible loan losses]. Aktual'nye voprosy sovremennoi ekonomiki = Actual Issues of Modern Economy, 2014, no. 4, pp. 42–45. (In Russ.)
  3. Ezangina I.A., Zakharova N.D. [The role of banking institutions in implementing the organizational and functional model of project finance management in Russia]. Russian Journal of Management, 2017, vol. 5, no. 3, pp. 393–403. (In Russ.)
  4. Tikhomirov D.V. [Financial model as management decisions tool in project finance]. Izvestiya Sankt-Peterburgskogo gosudarstvennogo ekonomicheskogo universiteta = Bulletin of St. Petersburg State University of Economics, 2018, no. 2, pp. 44–51. (In Russ.)
  5. Vorob'eva I.G., Kirvalidze D.G. [The role of commercial banks in a project financing in Russia]. Innovatsionnye tekhnologii v mashinostroenii, obrazovanii i ekonomike = Innovative Technologies in Engineering, Education and Economics, 2018, no. 1-2, pp. 53–56. (In Russ.)
  6. Krasilenko D.V. [Project financing, its essence, participants and mechanism of the organization]. Vektor ekonomiki = Vector of Economy, 2018, no. 9, pp. 26–33. (In Russ.)
  7. Radchenko K.S. [Qualitative risk analysis in project finance]. Molodoi uchenyi = Young Scientist, 2013, no. 4, pp. 285–287. (In Russ.)
  8. Mamedov F.N., Sazonov S.P. [Investment risk management methods for project finance]. Upravlenie. Biznes. Vlast' = Management. Business. Authority, 2015, no. 4, pp. 103–108. (In Russ.)
  9. Khlynin E.V. [Principles of the design financing used for realization of large investment investments in the fixed capital of the enterprise]. Izvestiya Tul'skogo gosudarstvennogo universiteta. Ser. Ekonomicheskie i yuridicheskie nauki = News of the Tula State University. Series Economic and Legal Sciences, 2017, no. 2-1, pp. 242–248. URL: Link (In Russ.)
  10. Korzun G.I. [Estimation of cost of combined financial instruments in financial statements]. Mezhdunarodnyi bukhgalterskii uchet = International Accounting, 2013, vol. 16, iss. 26, pp. 9–17. URL: Link (In Russ.)
  11. Mladenovich M.M. [Project finance in Russia: Special features and outlook for further development]. Upravlencheskie nauki v sovremennom mire = Management Sciences in the Modern World, 2017, vol. 1, pp. 445–448. (In Russ.)
  12. Ezangina I.A., Khmurova T.V. [Promising tools of project finance: A contemporary view]. Finansovaya analitika: problemy i resheniya = Financial Analytics: Science and Experience, 2016, vol. 9, iss. 20, pp. 18–32. URL: Link (In Russ.)
  13. Shcheglova N.Yu. [Regulating the procedure for making a provision for possible losses from loans granted by the Central Bank of Russia]. Problemy sovremennoi nauki i obrazovaniya = Problems of Modern Science and Education, 2016, no. 40, pp. 66–70. (In Russ.)
  14. Abduragimova R.M., Radzhabova M.G. [The procedure for making a provision for possible credit losses]. Sovershenstvovanie ucheta, analiza i kontrolya kak mekhanizmov informatsionnogo obespecheniya ustoichivogo razvitiya ekonomiki = Improvement of Accounting, Analysis and Control as Mechanisms for Information Support of Sustainable Development of the Economy, 2015, no. 1, pp. 193–197. (In Russ.)

View all articles of issue

 

ISSN 2311-8768 (Online)
ISSN 2073-4484 (Print)

Journal current issue

Vol. 12, Iss. 3
September 2019

Archive