Banking in Russia
Encyclopedia
There are significant regulations for banking in Russia. Bank
s in the Russian Federation should meet mandatory Russian legislation
requirements, and comply with numerous Bank of Russia instructions and regulations.
s and craftsmen. In 1862, there were only 140,000 deposit account
s totaling 8.5 million rubles in a country of 70 million people. After the abolition of serfdom
in 1861, savings accounts became more widespread. Growth was particularly rapid in the 1880s, when the central offices at the Central Bank were supplemented by regional offices at local treasuries and telegraph stations. Savings offices opened in rural villages as well as urban centers, leading to a total of 4,000 branches and two million individual accounts in 1895.
, with a few big state banks (like Sberbank
, Vneshekonombank, and Vneshtorgbank
). After more than 15 years of reforms
in Russia, there are now 1183 financial institution
s with 3286 regional branches.
On March 22, 1991, the Central Bank of Russia established the procedure for the issue of securities by commercial banks. From that time, Russian banks gained an outlet to the stock market. On April 2, 1991 the "Regulations for Buying and Selling (Transferring) Currency Exports Abroad through Citizens' Personal Funds" approved by the State Bank of the USSR entered into force. In this way, the creation of the Russian foreign exchange market
began. And on April 9, the first auctions on the State Bank's currency exchange were held. Ten commercial banks and one financial organization took part.
Large banks lost between 14 % and 45 % of their retail deposits. An exception was Sberbank
, which kept the large majority of its rouble-denominated accounts, but lost over 30 % of its USD-denominated accounts. To protect savers, CBR offered to transfer savings from insolvent banks to Sberbank, since deposits at Sberbank were insured. Also dollar accounts were transferred to Sberbank at a rate of 9 roubles per dollar much below the market rate, so that customers lost an estimated half of the value of their dollar deposits.
On September 3, 1998, during the 1998 Russian financial crisis, private accounts at the SBS-Agro and MENATEP banks, Inkombank, Promstroibank, Most Bank, and Moscow Business Bank were frozen. Depositors at these banks were given the opportunity to transfer their money to the Sberbank at the rate of 9.33 rubles/$. This action continued for one month.
Beginning in early October 2008, several Russian banks failed due to liquidity issues related to US credit derivatives. Russian bank Globex barred customers from withdrawing money from their accounts Oct. 15 in the first bank run of the current global economic crisis.
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
s in the Russian Federation should meet mandatory Russian legislation
Law of the Russian Federation
The primary and fundamental statement of laws in the Russian Federation is the Constitution of the Russian Federation.-Domestic sources:Since its adoption in a 1993 referendum the Russian Constitution is considered to be the supreme law of the land...
requirements, and comply with numerous Bank of Russia instructions and regulations.
History
Prior to 1861, the growth of private savings was limited by the fact that the majority of Russia's population was composed of serfs, agricultural laborers who were tied to the land and had few personal freedoms. The only people likely to take advantage of personal savings accounts came from a small class of urban merchantMerchant
A merchant is a businessperson who trades in commodities that were produced by others, in order to earn a profit.Merchants can be one of two types:# A wholesale merchant operates in the chain between producer and retail merchant...
s and craftsmen. In 1862, there were only 140,000 deposit account
Deposit account
A deposit account is a current account, savings account, or other type of bank account, at a banking institution that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the...
s totaling 8.5 million rubles in a country of 70 million people. After the abolition of serfdom
Serfdom
Serfdom is the status of peasants under feudalism, specifically relating to Manorialism. It was a condition of bondage or modified slavery which developed primarily during the High Middle Ages in Europe and lasted to the mid-19th century...
in 1861, savings accounts became more widespread. Growth was particularly rapid in the 1880s, when the central offices at the Central Bank were supplemented by regional offices at local treasuries and telegraph stations. Savings offices opened in rural villages as well as urban centers, leading to a total of 4,000 branches and two million individual accounts in 1895.
Soviet period
In Vladimir Lenin's view, banks were an important framework for the building of a socialist society. He believed the ready-made big banks of capitalism could be converted into an effective apparatus for state control of the economy. However, banking activities ground to a halt in the chaos of the years immediately following the revolution. All commercial banks closed down in October 1917. Their staff received salaries but were instructed not to perform any banking functions in the hope that economic paralysis would bring down the Bolshevik regime. Nevertheless, by the end of the year, the Bolsheviks had succeeded in nationalizing all commercial banks, sending armed detachments to occupy their offices in Petrograd. While business accounts were confiscated, private savings accounts were respected. Commissar of Finance V. Menzhinsky ordered the re-establishment of the Department of Savings Offices. However, his efforts to maintain the private savings system failed during the period of Revolution from 1918 to 1921. Throughout those years, farm and consumer goods were requisitioned, nearly all money was withdrawn from the economy, and the exchange of goods operated on a barter system.Russian period
The modern Russia inherited the banking system of the Soviet UnionSoviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
, with a few big state banks (like Sberbank
Sberbank
Sberbank Rossii is the largest bank in Russia and Eastern Europe. The company's headquarters are in Moscow and its history goes back to Cancrin's financial reform of 1841...
, Vneshekonombank, and Vneshtorgbank
Vneshtorgbank
Bank VTB , former Vneshtorgbank, is one of the leading universal banks of Russia and the largest in terms of authorized capital....
). After more than 15 years of reforms
History of post-Soviet Russia
With the dissolution of the Soviet Union on 29 May 1991, the Russian Federation became an independent country.Russia was the largest of the fifteen republics that made up the Soviet Union, accounting for over 60% of the gross domestic product and over 50% of the Soviet population. Russians also...
in Russia, there are now 1183 financial institution
Financial institution
In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries...
s with 3286 regional branches.
On March 22, 1991, the Central Bank of Russia established the procedure for the issue of securities by commercial banks. From that time, Russian banks gained an outlet to the stock market. On April 2, 1991 the "Regulations for Buying and Selling (Transferring) Currency Exports Abroad through Citizens' Personal Funds" approved by the State Bank of the USSR entered into force. In this way, the creation of the Russian foreign exchange market
Foreign exchange market
The foreign exchange market is a global, worldwide decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends...
began. And on April 9, the first auctions on the State Bank's currency exchange were held. Ten commercial banks and one financial organization took part.
Large banks lost between 14 % and 45 % of their retail deposits. An exception was Sberbank
Sberbank
Sberbank Rossii is the largest bank in Russia and Eastern Europe. The company's headquarters are in Moscow and its history goes back to Cancrin's financial reform of 1841...
, which kept the large majority of its rouble-denominated accounts, but lost over 30 % of its USD-denominated accounts. To protect savers, CBR offered to transfer savings from insolvent banks to Sberbank, since deposits at Sberbank were insured. Also dollar accounts were transferred to Sberbank at a rate of 9 roubles per dollar much below the market rate, so that customers lost an estimated half of the value of their dollar deposits.
On September 3, 1998, during the 1998 Russian financial crisis, private accounts at the SBS-Agro and MENATEP banks, Inkombank, Promstroibank, Most Bank, and Moscow Business Bank were frozen. Depositors at these banks were given the opportunity to transfer their money to the Sberbank at the rate of 9.33 rubles/$. This action continued for one month.
Beginning in early October 2008, several Russian banks failed due to liquidity issues related to US credit derivatives. Russian bank Globex barred customers from withdrawing money from their accounts Oct. 15 in the first bank run of the current global economic crisis.