Banking system in Russia

On December 20, 1991, the State Bank of the USSR was disbanded and all its assets, liabilities and property in the RSFSR were transferred to the Central Bank of Russia, which several months later was renamed the Central Bank of the Russian Federation.

The Bank of Russia carries out its functions, which were established by the Constitution of the Russian Federation and the Law on the Central Bank of the Russian Federation (Bank of Russia), independently of the federal, regional and local government structures.

Central bank of Russia:

- elaborates and pursues a single state monetary policy in interaction with the Government of the Russian Federation;

- exercises its exclusive right to issue currency and manages currency circulation;

- acts as the lender of last resort for credit institutions and manages the system of refinancing them;

- sets the rules to conduct banking operations;

- manages all categories of budget accounts;

- efficiently manages Bank of Russia international reserves;

- issues banking licenses to credit institutions and suspends and revokes them;

- supervises the activities of credit institutions and banking groups;

- organizes and implements foreign exchange regulation and foreign exchange control in compliance with federal legislation;

- sets and publishes the official exchange rates of foreign currencies against the ruble;

The RCB controls the money supply by lending funds to commercial banks and by establishing their reserve requirements.

All the above shows the intentions and ability of the Bank of Russia to control activities of commercial banks in order to optimize risk of their operations in the country.

It is very important to mention that now Russian commercial banks offer almost all principal services to their clients as western banks do, but quality of services leaves much to be desired according to the standards of Western industrialized countries.

It is absolutely necessary to mention the role of foreign banks which opened their branches in Russia within past 15 years. They have played a very large role in the Russian economy in the mid - 1990s, providing high class services to companies in Russia.

Western banks versus Russian banks. Strengths and weaknesses

The Bank of Russia carries out its functions, which were established by the Constitution of the Russian Federation and the Law on the Central Bank of the Russian Federation (Bank of Russia), independently of the federal, regional and local government structures. On December 20, 1991, the State Bank of the USSR was disbanded and all its assets, liabilities and property in the RSFSR were transferred to the Central Bank of Russia, which several months later was renamed the Central Bank of the Russian Federation.

The Federal Reserve System in the USA is the central bank of the United States. It was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. The Federal Reserve is independent within government; it is subject to congressional oversight. The government exercises some control over the Federal Reserve by appointing and setting the salaries of the system's highest-level employees. Although the state plays a great role in managing the FED, the system is based on privately owned capital.

It is very important to mention that now Russian commercial banks offer almost all principal services to their clients as western banks do, but quality of services leaves much to be desired according to the standards of Western industrialized countries. They are unable to offer diverse and efficient customer services because the Soviet Union had no retail banking tradition and because Russia lacks the sophisticated infrastructure, especially high-speed telecommunications and trained staffs, on which modern Western financial institutions depend.

Today, the Federal Reserve's duties fall into four general areas: conducting the nation's monetary policy and distributing national banknotes and coins; supervising and regulating banking institutions and protecting the credit rights of consumers; maintaining the stability of the financial system; providing financial services to depository institutions, the U.S. government, and foreign official institutions.

Central bank of Russia:

- elaborates and pursues a single state monetary policy in interaction with the Government of the Russian Federation;

- exercises its exclusive right to issue currency and manages currency circulation;

- acts as the lender of last resort for credit institutions and manages the system of refinancing them;

- sets the rules to conduct banking operations;

- manages all categories of budget accounts;

- efficiently manages Bank of Russia international reserves;

- issues banking licenses to credit institutions and suspends and revokes them;

Our Parliament- they tried to protect the newly-born domestic banks from extremely strong competition from very large and very experienced financial institutions of the West, but in the long run it would do more harm than good to our domestic banking sector. Lack of foreign competition will eventually stop the development of our banks by restricting access to Western financial techniques and new products and services our companies might need.