Everybody who has ever visited a bank in the CIS knows that there is an obvious lack of consumer orientation. Opening up a bank account or even the simple withdrawal of money from an account can be a very time-consuming activity. This is mainly due to over regulation by government agencies that are undertaken in […]
This section links the analyses of systemic changes, of developments of the banking sector in CIS and the possible scenarios with questions of optimal bank management in a CIS country.
Stabilization leads to the creation of a completely convertible currency. The government manages to keep a balanced budget. Subsidies are cut to a large extent. The initially inefficient allocation of ownership rights is corrected on the financial markets that become highly liquid and attract foreign capital.
Governments manage to stabilize their currency to some high-level but less volatile inflation rates, and the real interest rate (nominal interest rates minus anticipated inflation) converges to some stable rate.
A number of issues will be crucial for the development of the banking sector: Will governments be able to stabilize their currency? Will they manage to cut subsidies? Will they be able to commit not to intervene in the business of banks, but provide the necessary regulatory environment?
The development of the banking sectors in most countries of the CIS as of today has led to a number of severe shortcomings that has two main effects. First, banks do not fulfils their important function of facilitating the transfers of resources from savers to investors.
In the SU, production and exchange of goods and services had been organized through a network of branch ministries, banks, informal contacts between firms and some “pseudo markets”.
The transformation of the economies of the CIS affects the rules according to which the respective banking sectors function. We first describe the received banking system of the SU.
Exchanging goods on the spot against money involves high transaction costs. In order to save these costs, economic agents write contracts with each other that link the provision of a good or service today with the payment of some money tomorrow.
Experience in the West and in the East shows that state ownership of firms does not provide the incentives for managers to behave in a profit-maximizing way and to undertake effort in order to restructure the firms they are responsible for.
