The Banking System of Russia in 1987-1994: A New Organization and New Problems

The article delves into the evolution of the banking institutions in Russia from 1987 to 1994. The necessity to move away from a single-level banking system by the late 1980s became apparent as it failed to meet the demands of a market economy. The emergence of specialized banks significantly expanded the functionality of banking operations, accompanied by the establishment of numerous regional branches. However, their dependence on the government persisted, and the banks' own capital increased slowly. The advent of commercial banks marked the beginning of the development of a full-fledged two-level structure of the Russian banking system. The number of commercial banks increased rapidly, attributed to the low requirements for obtaining licenses to conduct banking operations. Many banks encountered either liquidation or merging with the others as control over their activities was tightened and new regulations were introduced. The article outlines the legislative history regulating the monetary and credit system. The development and establishment of the banking system in Russia constitute a complex and contradictory process, including the criminalization of this sector in the early 90s, linked to the insufficient regulatory activity of the Central Bank of Russia. This led to citizens mistrust in banks, especially during the growth and subsequent collapse of financial pyramids. Unresolved issues in the banking and financial sectors led to another institutional crisis in 1995.