Central Bank in Russia CBR Prepared by Saitov

Central Bank in Russia (CBR) Prepared by Saitov Kurman

The Financial System • The financial system of the Soviet period was a mechanism for state control of the economy. • The government owned and managed the banking system. • The State Bank was the central bank and the only commercial bank.

The Financial System • In 2004, commercial banking operations were separated from Gosbank and replaced the two specialized banks with three banks to provide credit to designated sectors of the economy: • the Agro-Industrial Bank • the Industry and Construction Bank • the Social Investment Bank, which managed credits for the social welfare sector.

Bank of Russia Functions The 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 effect settlements in the Russian Federation; • sets the rules to conduct banking operations;

Bank of Russia Functions • manages all categories of budget accounts, unless otherwise is stipulated by federal laws, by effecting settlements upon the instruction of authorised bodies of executive power and government extra-budgetary funds responsible for organising budget execution and executing them; • efficiently manages Bank of Russia international reserves; • makes decisions on the state registration of credit institutions, issues banking licences to credit institutions and suspends and revokes them;

Bank of Russia Functions • supervises the activities of credit institutions and banking groups; • registers the issue of securities by credit institutions in compliance with federal laws; • conducts on its own or on the instruction of the Russian Government all kinds of banking operations and other transactions necessary for the fulfilment by the Bank of Russia of its functions; • organises and implements foreign exchange regulation and foreign exchange control in compliance with federal legislation;

Bank of Russia Functions • establishes the procedure for effecting settlements with international organisations, foreign states and also legal entities and private individuals; • sets the accounting and reporting rules for the Russian banking sector; • sets and publishes the official exchange rates of foreign currencies against the ruble; • participates in drafting the Russian balance of payments forecast and organises the compiling of the balance of payments of the Russian Federation;

Bank of Russia Functions • establishes the procedure and terms and conditions for the organisation by foreign currency exchanges of operations to buy and sell foreign exchange and issues, suspends and revokes permits granted to currency exchanges to organise operations to buy and sell foreign exchange; • analyses and makes forecasts on the state of the Russian economy as a whole and by region, especially with regard to monetary, foreign currency, finance and price relationships, and publishes corresponding materials and statistical data; • performs other functions in pursuance of federal laws.

Role of CBR in monetary policy • Control of the money supply by lending funds to commercial banks and by establishing their reserve requirements. • In the early years, the CBR financed state budget deficits by issuing credits to cover Government expenditures. The availability of such credits played a central role in the high inflation that the Russian economy endured between 1991 and 1994. In 1995 new legislation and regulations reduced this type of credit by prohibiting the use of credit to finance state budget deficits

Methods of CBR monetary policy Central Bank of Russia provides the monetary policy by: • establishing of Central Bank rate; • establishing of the norms of required reserves for commercial banks; • refinancing operations; • operations on the open market; • currency operations and regulation; • issuing and impressments of money.

Structure of Central Bank • Headquarter in Moscow (Board of Directors and Departments); • 87 Regional Branches and National Banks (in each region); • 776 Local Branches (clearing centers)

The goals of banking sector development (strategy of CBR) • increasing the protection of interests of depositors and other creditors of banks; • enhancing the effectiveness of the banking sector’s activity in accumulating household and enterprise sector funds and transforming them into loans and investments; • making Russian credit institutions more competitive;

The goals of banking sector development (strategy of CBR) • preventing the use of credit institutions in dishonest commercial practices and illegal activities, especially the financing of terrorism and money laundering; • promoting the development of the competitive environment and ensuring the transparency of credit institutions; • building up investor, creditor and depositor confidence in the banking sector.

Commercial banking Regulated by Low on Banks and Banking Activities (1993) Banks may provide all kinds of banking activity: • to lend and borrow money; • to make money and currency transactions; • to open and serve accounts of enterprises and natural persons; • to invest money; • etc

Commercial banks activities • Most of the commercial banks offer their customers savings deposit accounts, and the more established banks provide foreignexchange services, investment services, and corporate services. • Some banks offer debit cards that allow customers to have payments for goods and services deducted directly from their bank balances. • Some banks also offer credit cards to customers with impeccable credit history.

Foreign banks • In early 1996, the State Duma passed a statute prohibiting the CBR from licensing foreign banks that did not have operations in Russia before November 1993 to protect national banking system • Nowadays it low doesn’t exist but foreign banks have to provide their activity from established departments registered by Russian lows.

Statistics 2009 -2010 2009 Quantity of closed banks Quantity of banks 2010 117 124 1066 1023

Banks innovations • Certificates of deposit (CD’s) for legal entities, up to 1 year. • Certificates of Savings (CS’s) for natural persons, up to 3 years • Structured financing (deposits connected on the another market indicators)

Positive factors of banks development • • Favorable macroeconomics environment; Increasing of trust for banks; Increasing demand for bank services; Diversification of banks services; Improving of management; Improving of risk-management; Transition to international standards of evaluation and planning.

Biggest Russian banks (by own capital) • • Sberbank (www. sbrf. ru) Gazprombank (www. gazprombank. ru) VTB-24 (Vneshtorgbank) (www. vtb 24. ru) Vnesheconombank (www. veb. ru) Alfa-bank (www. alfabank. ru) Bank of Moscow (www. mmbank. ru) Uralsib-bank Raiffeisen bank, Russian branch (www. raiffeisen. ru)