The banking system of Russia: history, features and interesting facts

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Before the financial crisis that broke out in the world in the second half of 2008, the Russian banking sector developed quite dynamically and was one of the most stable. This statement is supported by the fact of the steady growth of the total assets of the system, the amount of free funds transferred to organizations of various types and individuals as loans and loans, and the profit received as a result of these operations. The crisis and subsequent sanctions in 2014 somewhat weakened the financial stability of the state as a whole, but throughout its history, our country has successfully coped with much greater difficulties.

As collateral for loans

The banking system of Russia began its formation during the time of Empress Anna Ioannovna. She was the first to agree to the provision of loans from the bowels of the mint on the security of jewelry to private individuals. The loan was issued for thirty-six months at eight percent per annum. Before Anna, all Russian tsars supported the centuries-long ban on lendingpopulation. Ruinous interest could lead to the impoverishment of certain sections of society, and there would be little use for the state treasury from impoverished borrowers. But the establishment of the first official bank took place much later, in 1754, when Elizaveta Petrovna ruled the country.

The credit banking system of Russia at that time was available exclusively to landowners and gave the right to receive a loan secured by land. It was formed with the aim of awakening an entrepreneurial spirit in a lazy noble society. Elizabeth was a worthy successor to her father, who in every possible way encouraged the desire of enterprising people to organize private production. Until the death of the Empress, and then during the short period of the reign of Paul the First, the bank established by Elizabeth functioned successfully.

It was reformed already during the reign of Catherine the Great. In 1786, the government established the State Loan Bank, which began to accept deposits from the population. There was nothing like this before in Russia. And the prerogative of using its assets belonged to the state. And only a small part of the funds as insignificant loans went to support the entrepreneurship of the nobility and merchant class.

Copper bank and savings bank

In parallel with the work of Anna Ioannovna's loan institution in St. Petersburg, the Copper Bank functioned since 1758. Its peculiarity was that it issued loans in copper money, and accepted the return of borrowed funds in silver. Differencethe cost of coins generated profit and resembled a kind of current percentage system. At that time, paper bank notes did not yet exist in Russia. Copper, silver and gold were minted at the mint.

Everything changed in 1769 during the reign of Catherine the Great. The development of the banking system in Russia began with the issuance of new money. Paper rubles - banknotes - entered circulation. The State Loan and Copper Banks specialized exclusively in coins. There was a need to create an institution that would control the circulation of banknotes, carried out the timely replacement of those that had become unusable, which happened very often, since the population was not yet accustomed to the careful use of paper as a payment for goods. For these reasons, banknote banks were soon formed.

The next stage in the development of the Russian banking system was the development of savings banks. From them, a large financial organization, which we all know as Sberbank, traces its history. Its first cash desks were organized in two of the most significant cities of the state - Moscow and St. Petersburg. A landmark event took place in 1842.

From commercial to government

At that time, the Commercial Bank, established in 1817, played a rather insignificant role by state standards. Its working capital was used mainly by merchants. However, it was he who was subsequently destined to be transformed into the State Bank of the Russian Empire. The formation and subsequent rapid development of a newfinancial institution coincided with the period of the abolition of serfdom. The number of industrial enterprises was rapidly growing in the country, which significantly affected the prospects for the Russian banking system. If until 1860 there were about 20 financial institutions operating on the territory of the state, then in the next few years their number more than doubled. Loans to the population were offered by both joint-stock commercial and land banks.

In 1897, Finance Minister Sergei Witte carried out a monetary reform that gave the State Bank of the Russian Empire new powers. The institution performed the function of managing the country's monetary policy, carried out operations reminiscent of the current issue. The banking system of Russia was becoming increasingly important in the governance of the country. She was assigned the role of the main financial institution, which she retained even after the October Revolution. The nationalization of all credit institutions concentrated the collected funds in the People's Bank of the RSFSR, transformed from the State. In 1922 it was renamed the State Bank of the USSR. The commercial road to the general financial sector was closed. They were able to become a single system again only after almost 80 years.

Not our gold?

Keeping savings in foreign banks began as early as Russian tsars since the reign of Alexander II. It was he, according to historians, who provided America, in agreement with Abraham Lincoln, with 50 tons of gold to create a neutral currency capable of settling foreign trade transactions. The two politicians intended in this way to stop the plans of the British Empire to form the World Bank and get ahead of it along the way. But Alexander was not destined to see the result of his efforts. Soon he was gone, and Russia returned to this issue with the accession to the throne of Nicholas II. There is a version that for the formation of the US Federal Reserve System in 1913, our last emperor shipped several ships of the same gold. The theory is controversial, not documented, but there are also explanations for this.

The outbreak of the First World War diverted the attention of the Russian tsar from creating a new monetary unit, and then he was no longer up to gold - a series of revolutions led to the overthrow of the autocracy and the imminent execution of the once ruling family. The subsequent organization of the Russian banking system was aimed at solving internal problems. Moreover, in America, the new President Woodrow Wilson gave the Fed into private hands, which did not intend to give up Russian gold to anyone, even to its real owners. The debate about whether this was actually the case is still going on. Historians are eager to find documents confirming their version in the archives, and they themselves do not believe that they have been preserved. But there is no doubt that such papers existed.

Central Bank decides everything

By 1990, the State Bank of the USSR experienced several transformations. In its structure were republican branches, each of which was directly subordinate to the central office. A year and a half before the official collapse of the USSR, on the basis of the Russian Republican Bank,Central Bank of the Russian Federation. It has retained its name and purpose to the present day. His powers are currently dominant in the structure of the Russian banking system. Under his leadership and control are:

• management of the state's gold and foreign exchange reserves;
• formation of the rules for conducting banking operations;
• providing credit institutions with certain functions;
• revocation of banking licenses;
• cash issue;
• the establishment of immutable economic standards for all credit institutions of the Russian Federation and much more.

In other words, the Central Bank or the Bank of Russia is the very financial system of the state. Under it are all credit institutions operating in the territory of the Russian Federation and their representative offices, regardless of their belonging to the state apparatus. The modern banking system of Russia, headed by the Central Bank, develops and establishes legislative norms that apply to all financial institutions, forms a deposit insurance system, and makes settlements between independent payment systems. Its competence includes the development of modern banking technologies that make it possible to secure all existing business processes, training and retraining of employees of the financial sector through specialized educational institutions that are part of a single banking system. Everything related to transactions with money is under the control of the Bank of Russia.

Three-level banking modelsectors

Until 1995, when the Federal Law “On Agricultural Cooperation” was adopted, there was a two-tier banking system in Russia. And since 2001, after the signing of the Federal Law "On Credit Consumer Cooperatives", it has firmly switched to a three-level model. The lower, third step was just formed by two new structures. The second one is occupied by universal commercial banks and non-banking credit organizations. Their number and assets are constantly changing due to the opening of new and closing of old representative offices and branches throughout the country. All foreign banks operating in the Russian Federation are at the same level.

The first level is the Bank of Russia in the banking system and all its direct structural divisions. Despite the fact that it is not a public authority, all state institutions without exception are involved in the implementation of its functions, and control over all financial transactions is carried out by the Central Bank. It has a rather branched structure. It includes the central office, more than twenty departments, about sixty main departments of the Moscow State Technical University of the Bank of Russia, about two dozen national banks, as well as about a thousand cash settlement centers. Features of the Russian banking system in its three-level model, the lower stages of which have much larger assets than the upper, dominant one. Thus, agricultural and credit consumer cooperatives have a total cash reserve of more than 30 billion rubles. Whereas atIt is almost half the size of the Central Bank.

Narrowed geography

The density of activity of credit and banking institutions in Russia is about thirty points for every hundred thousand of the population. This is in terms of the total number of all residents of the state from Kaliningrad to Vladivostok. The same density of similar objects is observed in European countries. But unlike the West, banking institutions are unevenly distributed on the territory of the Russian Federation. Almost half of them are concentrated in Moscow. And the capital facilities account for three-quarters of the total assets of all domestic credit institutions.

But the problems of the Russian banking system are not only in the uneven territorial distribution of financial institutions and the funds concentrated in them. Currently, there are about seven to eight hundred credit institutions operating throughout the country, which have insignificant equity capital and make a meager profit on turnover operations. They can be described as dwarf banks. And there are about two hundred large financial institutions, in which more than 90% of all total assets are concentrated. Of these funds, almost half is in the hands of just a few banks that make up the top five. The share of Sberbank of Russia is a quarter of the mentioned 90%. The distribution of funds in the country is extremely uneven both in terms of territorial and capital turnover.

Collapse of the pyramids

Establishment of credit institutions that generate income for investors through new revenues fromthe same investors, and not from a profitable investment of capital - by no means the know-how of the enterprising domestic fraudster Mavrodi. In the mid-90s, he created the most successful financial pyramid "MMM" in the history of Russia. In those same years, similar “Vlastelina” and “Russian House “Selenga” functioned, but the number of ordinary people affected by their activities was much smaller. And Mavrodi managed to deceive about 15 million people, against two and a half million attracted to the Russian House Selenga. These banks did not play any significant role in the Russian banking system. They only collected deposits from the population for huge dividends, and when, according to the founders, a sufficient amount of money was concentrated in their hands, they collapsed the entire pyramid, leaving investors with nothing.

The first similar scheme to deceive the population was tested back in 1717 in France. For three years of work, the institution managed to involve so many people in its activities that after the collapse of the bank, the entire economy of the state suffered. In modern history, cunning scammers managed to pull off such a scam more than once in the United States. In 1920 by Charles Pontius with his company The Securities and Exchange Company. And in the mid-90s, Bernard Madoff. His financial pyramid Madoff Investment Securities today is considered the largest of all ever operating. It has existed for almost 15 years and managed to attract about 17 billion US dollars. Distinguishing an operating bank from a pyramid is difficult, but possible. And yet, in spite of everythingobvious signs of fraud, a huge part of the population falls victim to money scammers.

Microloan and macroprofit

The next type of dubious banking activity is quick loan arrangements. Microfinance institutions operated successfully in the Soviet Union until the 1930s. Since they carried out the outflow of consumers from state credit organizations, they were liquidated. The interest of owners of significant monetary assets in the structure and activities of microfinance credit cooperatives in Soviet Russia revived closer to zero. And institutions began to appear in the country, allowing the population to receive quick loans within 15 minutes. Naturally, at a significant percentage.

At the beginning of the new century, the state of the Russian banking system was unstable due to a protracted crisis in the industrial sector. Production has just begun to revive after the collapse in the early 90s. The slow growth of assets did not allow the population to receive the necessary loans from state and commercial banks. Only a lucky few received positive approval for a loan. Microloan institutions became the only way out for the majority of the country's population. Demand for them increased, the emergence of new institutions was not long in coming. Today, there are more credit points where you can take a loan at 700% per annum than the cash halls of large banks. Microfinance institutions bring huge income to their founders.

In the grip of sanctions

SWith the annexation of Crimea, the banking system of the Russian Federation faced great difficulties in its activities. The sanctions policy of Europe and the United States limited the inflow of capital into the Russian economy, foreign investors began to leave the disgraced country en masse. Against the backdrop of the recent global financial crisis, from which it was never fully recovered, the sanctions became almost a disaster for the banking system. Over the past decades, domestic oligarchs have preferred to keep their assets in offshore or more closed foreign banks. Capital turnover was steadily declining, financial institutions could not fulfill their obligations adequately.

During the same period, the shortcomings of the Russian banking system were exposed. The mechanisms for financing enterprises, the principle of pricing in the bowels of the stock exchange, investing in foreign currency, and not in the domestic economy, more testified to the desire of banks to earn for themselves, and not for the country. Hence the high interest rates on loans. In addition, the policy of strengthening the ruble continues to be rather ineffective and leads to a further rise in inflation. The banking system of Russia, unfortunately, is cut off from the needs of the population and works mainly for itself.