Russian Banking

Russian Banking

Evolution, Problems and Prospects

New Horizons in Money and Finance series

Edited by David Lane

Russian Banking considers the rise of commercial market-oriented banks in Russia, their links with government and non-financial companies and their role as intermediaries in the provision of finance for investment. The contributors explore the legacy of the Soviet past and current functions of the Russian banking system, contrasting these with those in other post-communist societies and describing peculiarities such as informal networks and corruption.

Chapter 3: The Present and Future of Banking Reform

William Tompson


William Tompson The Russian banking system in 2001 presented a paradox. Russian banks were, on the face of it, healthier than they had ever been. They were also, both politically and economically, more of an irrelevance than at any time since the early 1990s. The aim of this chapter is to examine this paradox in an attempt to understand the place of the banking system within the Russian polity and economy, as well as to assess the prospects for banking reform. The discussion begins with an assessment of the state of the sector in early 2001, before turning to consider in turn the banks’ political and economic role in Russia since the August 1998 financial crisis. This will be followed by an examination of the outlook for banking reform, a look at the interim ‘coping’ strategies being devised to compensate for the weakness of the banking sector and a brief conclusion. THE STATE OF THE SECTOR Assessing the health of Russia’s banking sector remains notoriously difficult.1 While the overall quality of Russian economic data has improved in recent years, there remain particular problems with banking data. First, there are good reasons to doubt the completeness and accuracy of banks’ reporting of their positions to the Central Bank of Russia (CBR). Secondly, the data are based on Russian rather than international accounting standards. Russian accounting standards (RAS) leave the banks much greater freedom to decide whether or how to classify problem loans and do not generally require assets such as...

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