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 11: Progress Towards Financial Stability

Brigitte Granville


11. Progress towards financial stability Brigitte Granville1 INTRODUCTION However unforeseen, the consequences of the Russian default on over $40 billion-worth of debt in August 1998 extended to a perceived threat to the stability of the global financial system. This perception was reflected in the actions of the US Federal Reserve in the autumn of 1998: rapid monetary easing, and the move to arrange a rescue for Long Term Capital Management (LTCM) from insolvency as a result of the Russian crisis. The experience of Russia and the other major emerging countries caught up in the financial market crises of 1997–98 has informed IMF-led attempts to develop Codes and Standards (C&S) and measures for financial crisis prevention and cure as part of a renewed ‘International Financial Architecture’ (IFA).2 Standards of good practice have been codified in Reports on the Observance of Standards and Codes (ROSCs). The IMF’s ‘Article IV’ report on Russia of July 2000 (made public by the Russian authorities in October 2000) referred to the fact that a ROSC had been completed. This paper begins with an overview of the state of the Russian economy against the background of the 1998 crisis and hence the systemic risks contained in the problems of Russia’s transition. This provides the necessary context for making sense both of detailed policy work related to the implementation of C&S and, in some areas, of the absence of any such work. In addition, the economic background is essential to distinguish the...

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