Experts have agreed that establishing a viable financial sector is a vital requirement for Russia to have a successful market economy. In the first five years of the post-Soviet era, the development of Russia's financial sector as an efficient distributor of money and credit to other parts of the economic structure has mirrored the ups and downs of the rest of the economy. In 1996 some elements of the central planning system remained obstacles to further progress.

The Soviet Financial System

The financial system of the Soviet period was a rudimentary mechanism for state control of the economy. The government owned and managed the banking system. The State Bank (Go-sudarstvennyy bank--Gosbank) was the central bank and the only commercial bank. In its capacity as a central bank, Gosbank handled all significant banking transactions, including the issuance and control of currency and credit, the management of gold reserves, and the oversight of transactions among enterprises. Enterprises were issued money and credits in accordance with the government's planned allocation of wages and its management strategy for other expenses.

Wages were paid only in cash, and households used cash exclusively for making payments. Checkbooks, credit cards, and other alternative forms of payment were not available in the Soviet Union. Wage earners could keep savings deposits in the Savings Bank (Sberbank), where they earned low interest, and these funds were available to the government as a source of revenue. Two other banks also existed prior to 1987. The Construction Bank (Stroybank) provided investment credits to enterprises, and the Foreign Trade Bank (Vneshtorgbank) handled financial transactions pertaining to trade.

In 1987 and 1988, the Gorbachev regime separated commercial banking operations from Gosbank and replaced the two specialized banks with three banks to provide credit to designated sectors of the economy: the Agro-Industrial Bank (Agroprombank), the Industry and Construction Bank (Promstroy-bank), and the Social Investment Bank (Zhilsotsbank), which managed credits for the social welfare sector. The Soviet economy also had state-controlled insurance firms, but other forms of finance such as stocks and bonds did not exist.

Data as of July 1996

NOTE: The information regarding Russia on this page is re-published from The Library of Congress Country Studies and the CIA World Factbook. No claims are made regarding the accuracy of Russia The Soviet Financial System information contained here. All suggestions for corrections of any errors about Russia The Soviet Financial System should be addressed to the Library of Congress and the CIA.