What role for commercial banks in the evolution of Russian capitalism?
Russia’s commercial banks have played a relatively minor role in the country’s economic development since the collapse of the Soviet Union. Indeed, their impact has often been negative. And they are unlikely to make a major contribution in the future. These are the conclusions of new ESRC-funded research by Dr David Lane of Cambridge University.
Lane's prognostication for the future of capitalism in Russia is that banks are unlikely to act as significant 'intermediaries' between investors and the accumulation of capital. The reason is that the risks to investors' money are high and investment is more profitable elsewhere. Lane suggests that the greater State involvement in the banking system that is happening under the Putin administration is a rational policy well suited to Russia's economic needs and it is likely to increase.
During his research on the evolution of the post-Soviet banking system in Russia, Lane and Russian colleagues interviewed over 300 bank officials, government officials and politicians in Moscow, Kazan, Kaliningrad, Tula, Kostroma, Khanty-Mansiysk, Ekaterinburg and Nizhny Novgorod. Their research shows that:
• Commercial banks have made considerable progress in turning themselves into capitalist-type institutions since the Soviet period, when they had no role in the appraisal of risk, either in the production of commodities or with respect to enterprises that produced them. These banks provide a comprehensive range of customer services: 98% keep current accounts and 96% deposit accounts for depositors, 86% provide currency exchange and 82% provide financial and legal advice.
• But while 94% of these banks provide short-term loans of under one year, only 49% of them give long-term credit - three years or more. And diverging from Western banking practice, 93% issue bills of exchange (‘veksels’) and 47% provide facilities to promote barter between enterprises. This reflects the increasing function of banks to bridge the gap in money supply left by the central bank’s restrictions.
• Russian banks moved from speculation in currency in the early post-Soviet days to discounting government bills. But they provided very little loan support to domestic industry. Following the economic crash of 1998, banks have increased provision for finance for industry but it is on a very small scale: they are reluctant to lend long-term because of the great risk pertaining to domestic companies, particularly those trading on the home market.
• Ownership of banks differs from that of their Western counterparts: 77% of commercial banks report that their share capital to a high degree is owned by non-financial companies. In 1995, as much as 62% of the authorised funds of the former State banks ('old banks') and 69% of the funds of newly formed commercial banks belonged to non-state enterprises.
• The formation of the new Russian banks illustrates the practice of large industrial concerns of creating banks rather than - as in the experience of developed Western capitalism - banks being initiators of industrial development. Such developments have some parallels in the early stages of industrial capitalism in England. But the formation of 'company banks' on such a scale is a new phenomenon. An implication here is that non-financial companies, with a stake in, or owning, a bank could transfer profits abroad leading to significant national capital loss.
• Persistence of previous administrative linkages between the old banks and their clients (non-financial companies) is pervasive. 'De-statisation' also often involved government institutions taking shares in companies. Organs of government retained ownership and control over local enterprises because there were no purchasers. This, in turn, led to involvement of the State in the privatised banks.
• In addition to ownership of major banks, State involvement is also present in other ways. It may take the form of control of banks by the administration at the level of the ministries and regional State powers. Examples are the Ministry of Railways (major owner of Zheldorbank), the City of Moscow (Bank of Moscow) and the Republic of Tatarstan, which has considerable ownership of banks in the Republic.
• Many of these banks, such as the Bank of Moscow, have become a major source of credit for local government (regions and city) administrations. Powers had been devolved to regional administration allowing them to 'authorise' banks in their localities. 'Authorised' banks were formed, which had a special relationship with organs of State power and gave a material base to regional governments.
===== Kevin Dean Buffalo, NY ICQ: 8616001 http://www.yaysoft.com
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