Russian Banking
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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.
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Chapter 1: The Evolution of Post-Communist Banking

David Lane

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1. The evolution of post-communist banking1 David Lane The discussion of economic transition/transformation in the post-communist countries has revolved around the focal points of the introduction of markets and the privatization of assets. The banking system, the role of money and their implications for economic development have been considerations of a secondary order initiated as a consequence of the hyperinflation of the early 1990s and the financial collapse of 1998. The role of banks, however, has been crucial in the development of capitalism. As part of a market system of autonomous profit-motivated units, banks have become a crucial part of the capitalist system. As Ingham has contended, the creation of credit-money by banks and states is ‘constitutive of capitalism’. What fuelled the development of capitalism, he has argued, was the ‘capacity to create “mobile” money in a form that integrated the new “private” bill and note credit-money of the banker-traders with the existing forms of “public” coinage currencies’ (Ingham, 1999, p. 79). Essentially, banks are institutions which through the provision of a supply of money (bank credit) promote, or at least facilitate, the growth of wealth. As well as being a major source of wealth creation for the bankers themselves, the power to issue money gave banks considerable control over the allocation and division of economic resources. By the withdrawal of credit clients would be bankrupt, and by allocating capital between different end uses banks influence the ways economies develop. However, banks have not always been...

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