Evolution, Problems and Prospects
- New Horizons in Money and Finance series
Edited by David Lane
Chapter 2: Bank Sector Restructuring
Satoshi Mizobata The Russian ﬁnancial crisis in August 1998 caused a great deal of damage to the banking sector. However, the oligarchic ﬁnancial groups have not lost their power. The ﬁnancial groups have strengthened their inﬂuence on the Russian Union of Entrepreneurs and Industrialists, whose member-ﬁrms accounted for more than 80 per cent of GDP (Segodnya, 25 November 2000), and maintained their presence in the (central and local) governments. In addition, the ﬁnancial crisis and the subsequent economic recovery in Russia conﬁrm that the development of ﬁnancial institutions, which intermediate between the owners of the means of production and innovators, is indispensable for the capitalist economic system (Schumpeter, 1962). Financial system reforms in the aftermath of the crisis have also helped improve our understanding of the peculiarities of the Russian economic system. FINANCIAL FLOWS AND THE ROLE OF THE BANKING SECTOR I will describe ﬁnancial ﬂows by sector, focusing in particular on the role of the banking sector in ﬁnancial circulation (see Figure 2.1, Vedev, 1999, pp. 53–69). First of all, households and non-residents can be regarded as net creditors, or surplus sectors, as they oﬀer funds through deposits and loans. As these funds and banks’ own funds are lent to ﬁrms and governments, the latter become net debtors, or deﬁcit sectors. The 1998 crisis did not cause any fundamental changes in these ﬁnancial ﬂows. But the following characteristics can be added: 1) although banks are net creditors in rubles, in foreign currency they...
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