Russian Commercial Banks

At the turn of the twentieth century, the Russian and the Japanese empires were in constant rivalry which culminated in the Manchurian conflict of 1905. Nowadays, the governments of the two countries have established partnerships in the fields of industry, finance, and technology. Compared to the banking system of Japan, Russia’s financial sector still appears somehow awkward, although it has undergone a considerable development during the past decade.

The Soviet financial system was a rather primitive mechanism, used by the state regime to exercise control over the country’s economy. At that time, Russia’s central bank was simultaneously the only commercial bank in the country. In addition to the state bank (Gosbank), the only two banking institutions existing in Russia (before 1987) were the Construction Bank, named Stroybank, which provided investment loans to legal entities, and the Foreign Trade Bank (Vneshtorgbank) which handled the financial transaction of the Russian companies, trading on the world markets.

With the wind of change starting to blow in Moscow between 1987 and 1988, Russia’s leader Mikhail Gorbachev issued a decree which stipulated that commercial banking was separate from Gosbank, while Stroybank and Vneshtrogbank were replaced by Agroprombank, financing the sector of agriculture; PromstroyBank, financing the sectors of construction and industry; and Zhilsotsbank, which provided credits that were intended for the social sector.

In the 1990s, the banking system in Russia was among the fastest changing components of the country’s economy. With the dissolution of the Soviet Union at the end of 1991, Gosbank terminated its existence and was replaced by the Russian Central Bank (RCB). RCB’s first chairman was Viktor Gerashchenko, whose name is associated with the so-called Black Tuesday, when the Russian Ruble suffered a severe devaluation on the exchange markets. At present, some of the central bank’s responsibilities include: exerting control over the country's supply of money, monitoring inter-bank transactions, implementation of the federal budget and taking care of Russia's foreign debt, as well as close monitoring of the foreign-exchange rate of the national currency. Because of its essential role in the country`s monetary policy, the central bank has always exercised a strong influence on the country’s economy.

The World Bank (WB) has provided assistance to the Russian government in the 1990s, in order to establish a core of largescale banks, which had to meet the criteria, set by the Bank for International Settlements. These criteria regarded the interest rates and the size of loans, the amount of the banks` capital base, and the amount of loan reserves which banks were required to maintain. In the long term, the entire banking system of Russia is expected to conform to the BIS standards.

Commercial banks started mushrooming in Russia with the fall of Communsim and by the end of 1995, their number was close to 3,000. However, most of the institutions were of small scale, and their financial reliability was dubious. Nowadays, the core of Russia’s commercial banking sector consists of large, viable, and highly-reliable banks.

The Soviet-era Savings Bank (Sberbank) is currently Russia’s strongest and largest commercial bank. Established back in 1841, the bank now has more than 265,000 employees and maintains the largest branch network with over 19,400 retail outlets across the country. At the end of the second quarter of 2009, Sberbank (listed on the Moscow Stock Exchange under SBER) accounted for over fifty percent of the retail deposits, holding a thirty-one percent share on the Russian loan market. Sberbank provides a full range of banking services, including various retail deposit products, retail and mortgage loans, bank payments and transfers, currency exchange, bank cards, traveller’s checks, mutual funds, and precious metal trading and deposits, online and mobile phone banking, and ATM facilities. To its corporate clients, the bank offers corporate deposits and loans, including loans in precious metals, such as gold, silver, and platinum and financing for manufacturing activities, along with brokerage services, and financing of investment and construction projects.

Established in 1990, Russia’s MDM Bank is a leading independent provider of integrated financial services, currently having more than ten thousand employees and a network of over 350 retail outlets in 160 cities. Since June 2009, the bank has started a merger with URSA Bank. Although the new bank will operate under MDM Bank`s brand name, the merger has been structured as acquisition of MDM by URSA. The new bank will be headquartered in Novosibirsk. MDM Bank has two main divisions: Corporate Banking & Investment Banking (CIB), coveting corporate and investment banking, financial markets, private banking, asset management and leasing, and Retail Banking business, offering everyday banking services to individuals, as well as banking solutions for small and medium-sized businesses.

Vneshtorgbank, existing now as VTB Bank, is one of Russia’s most reliable commercial banks, offering to its individual, corporate, and business clients the full scope of integrated banking solutions through its subsidiaries VTB 24 JSC (retail banking), VTB Corporate Banking and VTB Capital.