5. Asset management approach

It was a widespread phenomenon, that in addition to the other capital and bankruptcy problems, Russian banks suffered from a poor asset management. It cannot be directly concluded that the management board was very corrupt, instead, it was on the right way towards development. Only the lack of experience and modernity in systems made it extremely difficult to implement proper management techniques. An illustrative example could be a fact that the asset managers had little clue as to how to interpret and adapt cash reserve requirements. For instance, neither primary nor secondary reserves were shown on the balance sheets. The liquidity requirements (which implied the use of various liquidity ratios) also could not be very applicable, because the accounting standards couldn’t provide a reliable background. As a result, the liquidity risk was a form of a personal assessment. Second, the integration of optimization programmes made a general situation even more complicated, because these methods required an application of sophisticated mathematical tools which bank managers were not familiar with. The maturity schemes on the asset and liability sides of the balance sheet were not taken into account at all. Against the background of poor asset management, the commercial banking sector was attracted to the idea of profit-maximization through the provisions of a short-term lending. It is assumed that it was the only practical decision in the environment of the “Transformation stage” (Steinherr A., 2006).

6. The view on the Commercial banking after the collapse of the ussr

In opposite to the USSR regime, the commercial bank sector received its autonomy and thousands of new commercial banks started flourishing across the country (the commercial banking only needed to comply with the Central bank’s monetary policy and the general requirements). For example, the commercial banks were allowed to establish their own interest rates provided that they did not abuse the rules of the CBR. However, because the situation within a country was not stable and the Central Bank was mainly focused on the bankruptcy and inflation, the commercial banks received a great flexibility. It would be rather fair to assume that the commercial banking happened to be self-controlled and this freedom had brought widespread corruption problems and obviously impaired the fragile Russian banking sector. In the meanwhile, Russian banking developed very rapidly due to other important factors. The growth had been supported by the highly profitable returns, which derived from: the privileged position of the banks as “the agents” of Russian monetary policy, the maintenance of a high share of zero-interest deposits and the ability to capture high spreads between deposit and lending rates (Warner A.M., 1998).

7. Concluding remarks

The transition stage had double effects on the general development of the Russian economy during the period of 1991-1998. On the one hand, the flaws of the Russian government and its weak monetary policy stimulated major problems associated with inflation, bankruptcy and corruption. These resulted in a slow economic growth. On the other hand, the Russian banking system evolved very rapidly. This growth could be linked to the banks’ flexible and profitable position within the economy. The Russian crisis during the period of 1991-1998 also undermined the development of the Russian economy, however, the banking sector was quite resistant to it. Because of the high inflation rates and a huge budget deficit, a great number of banks had to close down. However, the flexibility of the commercial banks stimulated a large growth in banking (Metelev S.E., 2008). It is certain, that the system of banks was not clear in its structure and got absorbed by the fraud, yet it had mushroomed all across the country, and the amount of financial institutions had enormously grown in comparison to the socialist times.