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THE BANK OF RUSSIA.   Term Paper ID:30067 Click to get this paper

Essay Subject: Discusses reorganization of the banking system in Russia under major transfers of power in the country.... More...

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Paper Abstract: Discusses reorganization of the banking system in Russia under major transfers of power in the country. History of various banking structures during the 20th Century. Legal framework of the Bank. Its current (2000) role and main functions in the modern Rusian economic system. Political nature of the Bank of Russia. Paper Introduction: The Russian Central Bank: History, Role and Functions Introduction: The banking system in Russia has gone through re-organization with nearly every major transfer of power in the country’s history. It has taken the form of a simple organization with the main objective of providing a single currency throughout the country, to a powerful centralized regulatory system directed by the Finance Ministry of the Communist regime, to its current form. Today’s Russian central bank, the Bank of Russia, is a primitive model of Western central banks, in some ways more involved in economic development and in some ways less. This paper will give a br Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. Its direct involvement with thedirection of monetary policy is perhaps the most glaring example of thepolitical nature of the Bank of Russia. Slowly however the Bank of Russia, through itsheavy regulation of the banking industry and the maintenance of a limitednumber of state run branches, has begun to gain the trust of the ordinarycitizen. In addition to thesespecific statutory functions, the Bank operates several regional state runbanks under the umbrella statute allowing it to "conduct, on its own behalfor on behalf of the government of the Russian Federation, all kinds ofbanking operations necessary for [its] implementation of its main duties(Central Bank of the Russian Federation, 2 ). The hope then is that the Bank will use its regulatory powers toensure access to capital for the ordinary individual Russian entrepreneur(Russia.net, p. [Online]. The Bank of Russia further exceeded the Westernconcept of an independent central bank by developing and running anexchange market for government securities in 1998. UnderArticle 4 of the Federal Law on the Central Bank of the Russian Federation,the Bank is required to actively participate and cooperate with thegovernment in the formulation of national monetary policy (Legal Status,2 , p.1). (Central Bank of the Russian Federation, 2 ). Seattle, WA. Finally, it has some impact on the value of theruble through its drafting of the Russian Federation' balance of payments(Van de Waal-Palms & Lapidus, 1997). From the People's Bank of Russia with it's rather limitedauthority to the State Bank with its almost unlimited authority, thecurrent Central Bank of the Russian Federation is a blend of itspredecessors. The People's Bank of the RSFSR. (State Bank, 2 , p.1). In addition, the Dumaappoints an auditor to the Bank and must approve both audit and annualreports. The people's confidence in newly privatized banks keptthem away from saving and borrowing, while the politically powerful wereable to capture a large portion of available funds for their sometimes lessthan legitimate profit making activities (Van de Waal-Palms & Lapidus,1997; Russia.net, p. Some of these new ventures stemmed fromthe needs of newly privatized industries, while others were the result ofprofit seeking entrepreneurs anxious to enter the banking industry (CentralBank of the Russian Federation, 2 ). (Central Bankof the Russian Federation, 2 ). (Central Bank of theRussian Federation, 2 ). (Legal Status, 2 , p.1, 2). Legal Status. 1). [Online]. Constitutionally created and statutorily enabled with thedawn of the demise of the Soviet Union, the Bank is modeled after itsWestern counterparts but given much greater reach due to the specific needsof the fairly recently created Russian Federation. The argument can be made that at the dawn of thetransition to an open economy, Russia' s banks needed to be treated as aninfant industry. The functions of the Bank of Russia overlappedthose of the State Bank and after the dissolution of the Soviet Union, theCommonwealth Independent States dissolved the State Bank and turned itsfunctions over to the Bank of Russia exclusively. Even more contrary to the Western idea of a centralbank to oversee a country's banking system is the existence of state runbanks under the direction of the Bank of Russia. In carrying out this mandate, the Bank playsanother important role in creating a successful market economy; thedissemination of information. In addition to the activities enumerated so far the Bank of Russia,much like its US counterpart, acts as source of economic research and data. (no date). This paper will give a brief history ofthe various banking structures in Russia during the 2 th century, focussingprimarily on the relatively recent history of the Bank of Russia. TheState Bank re-introduced banking functions into the economy. It also "organizes and exercises foreignexchange control on its own and through authorized banks" (Van de Waal-Palms & Lapidus, 1997). Central Ban of theRussian Federation. The State Bank of the USSR. What would become known as the State Bank of the USSR, the soviet'scentral bank, was established one year later. Like theUnited State's central bank, the Bank of Russia acts as the creditor oflast resort for Russia's commercial banks (Legal Status, 2 , p.1). Understanding RussianBanking. An extensive list of functions and duties for the Bank are enumeratedin the statues. The Bank of Russia oversaw not only the privatizationof these specialized branches, but the establishment of new commercialbanks as well (Russia.net, p.1). It dictates the rules of conduct, reporting andauditing for both banks and credit organizations (Van de Waal-Palms &Lapidus, 1997). Van de Waal-Palms, J. The Duma confirms the appointment of the Chairman and members ofthe Bank's board of directors and has the power to discharge them as well(Central Bank of the Russian Federation, 2 ). Because the"bank" no longer served a true banking function, it was dismantled in 192 and its budgetary functions were taken over by the Ministry of Finance.(Central Bank of the Russian Federation, 2 ). It hastaken the form of a simple organization with the main objective ofproviding a single currency throughout the country, to a powerfulcentralized regulatory system directed by the Finance Ministry of theCommunist regime, to its current form. Available: http://www.cbr.ru/eng/today/structure/print.asp?file=subdivisio n.htm. (1997). One of the main economic assumptions ofproperly functioning markets is, after all, perfect information. [Online] Available: http://www.cbr.ru/eng/today/history/print.asp?file=gosbank.htm. 2). As previously mentioned, the Bank's predecessor, the StateBank, had a monopoly on banking operations and ran several specializedcommercial branches. The Russian Central Bank: History, Role and FunctionsIntroduction: The banking system in Russia has gone through re-organization withnearly every major transfer of power in the country's history. The Bank isindependent in that it is not attached to any other government entity, butis answerable to the Duma (legislature) which continues to practice limitedoversight. By 192 the Bolshevik regime, through thePeople's Bank, had eliminated most banking operation by setting up accountswhereby profits of state run enterprises (at this time all enterprises werestate run) were simply recorded and transferred first to the government'scentral budget, then reallocated back to enterprise budgets through papertransactions. The general constitutional and statutory duties of the Bank are toprotect the value of the Russian currency in foreign markets, oversee theRussian banking system and to act as the exclusive issuer of currency(Legal Status, 2 , p.1). In the area of foreign exchange regulation, the Bank serves threemain functions. - (2 ). This section will discuss in moredetail the specific functions of the Bank in carrying out those duties. Given the need for a transition from a centralized to open economyhowever, this far-reaching form of banking oversight may have at one timebeen necessary. [Online] Available:http://www.cbr.ru/eng/today/history/print.asp?file=central_bank.htm. It's mainduties were to regulate the circulation of money through lendingoperations, to exclusively deal in foreign currency and to set the exchangerates (Central Bank of the Russian Federation, 2 ). In fact, it is statutorily obligated to "analyze and forecast the state ofthe Russian Federation's economy as a whole and by region, concerningspecifically monetary, credit, foreign exchange, financial and pricerelations [and] publish the corresponding materials and statistical data"(Legal Status, 2 , p. The State Bank wasnot an independent central bank, rather it was run by the Ministry ofFinance. - (2 ). Though it's involvement in controlling the value of the Russiancurrency in foreign markets is extensive, the majority of the Bank'soperations are geared toward the regulation the banking system. (Legal Status, 2 , p.1). It is enabled in itsfunctions under the Federal Law on the Central Bank of the RussianFederation (Central Bank of the Russian Federation, 2 ). By 199 the USSR was undergoing major political reform, and thegovernment, now dedicated to transforming to a market economy, establishedthe Bank of Russia as an independent central bank (State Bank, 2 , p.3;Central Bank, 2 , p.1). The legal framework for the Bank of Russia will first beestablished, followed by a discussion of its current role and functions inthe modern Russian economic system.2 th Century Central Banking in Russia: The People's Bank of Russia, established in 1894, was the first formof centralized bank in Russia and had as its primary duty the issuance of acommon currency (People's Bank, 2 , p.1). The structure of the Bank is divided into two units and twenty-fivesections. Thesecond half of the paper will cover the Bank of Russia since its inceptionexclusively. In addition, the Bank's independence is furtherestablished by the lack of mutual obligation between the rest of thegovernment and the Bank for financial obligations (Central Bank of theRussian Federation, 2 ). The Bank of Russia oversaw the privatization ofthese specialized branches, but remained actively involved in the operationof the new commercial banks through an auditing and supervisory role.(Central Bank, 2 , p.1). (Central Bank of the Russian Federation, 2 ). Brief History of Russian Banking. While theBank will likely never facilitate this ideal, its regular reporting isalmost certainly an improvement on the number of informed consumerscompared to under the State Bank.Conclusion: The Russian banking system has undergone several transformations overthe past century. Within the realm of these functions fell perhaps the Bank's mostimportant role for the modern Russian economy; the privatization of thebanking system. Today's Russian central bank, the Bank of Russia, is a primitive modelof Western central banks, in some ways more involved in economicdevelopment and in some ways less. Over the course ofits 7 years of existence, the State Bank slowly took over the vastmajority of banking functions within the Soviet Union (State Bank, 2 ,p.3; Central Bank, 2 , p.1). References The Central Bank of the Russian Federation. - (2 ). The successful transition from state run to privately operatedcommercial banks was essential to the success of a move to a market economyfor Russia. Finally, the Bank is statutorily protected fromstate or federal interference with its operations (Central Bank of theRussian Federation, 2 ). 1). Structural Units of the Bank of Russia. The general purposes of the Bank are essentially the same as those ofWestern central banks, however the scope of authority of the Bank in someways far outreaches its counterparts. [Online] Available: http://www.cbr.ru/eng/today/history/print.asp?file=narbank.htm. (Van de Waal-Palms &Lapidus, 1997). First, it sets the settlement rules of the RussianFederation and establishes procedures for settlements with foreigncountries. Available: http://www.cbr.ru/eng/today/status_functions/print.asp?file=mai n.htm. & Lapidus, M. An idea of the reach of the Bank in the Russian economy can begained by noting the existence of the Department for the Organization andImplementation of the Federal Budget and Extra-Budgetary Funds, and the twounits, The Main Division for Security and Information Protection and TheMain Real Estate Division (Structural Units, 2 , p.1).Function and Role: As previously stated, the main functions of the Bank of Russia are toissue currency, control the flow of currency within the Russian economy, toprotect the value and stability of Russian currency in foreign markets, andto oversee the Russian banking system. [Online].Available: http://www.dark.seanet.com/business/banking_history.html. However, as Mikhail Lapidus points out in UnderstandingRussian Banking, "Even a little unnecessary regulation is still a barrierto economic reconstruction" (Van de Waal-Palms & Lapidus, 1997). These will primarily be discussed in the followingsection, however one duty in particular is worth noting here. In doing so, the Bank ensuressmooth transactions and encourages foreign investment in the economy.Secondly, it buys and sells foreign and domestic currencies as it deemsnecessary in order to control the value of the ruble (Central Bank of theRussian Federation, 2 ). (Central Bank of the Russian Federation, 2 ). (2 ). Under the State Bank system, individual entities were required toborrow funds from specialized branches representing various sectors of theeconomy (Russia.net, p.1). Unfortunately, the lack of experience to draw on for such atransition caused initial problems for Russia (Van de Waal-Palms andLapidus, 1997, p.2). The Bank of Russia remains the central bank ofthe Russian Federation today, and as the next sections will demonstrate,operates today as an interesting mix between independent central bank andgovernment entity.Bank of Russia - Legal Framework: The Bank of Russian (The Bank) was established under the Constitutionof the Russian Federation. - (2 ). Palms & Company, Inc. This is a clear example of the difference between the Russianconcept of an independent central bank and that of the United States.Several more are included in the following section. It maintains a registration of securities issued by creditorganizations (Van d Waal-Palms & Lapidus, 1997). In 1917, the Bolsheviks tookover the bank and expanded its functions to include bringing all commercialbanks under government control and overseeing the direction of the economy.This last duty included drafting government sector budgets. The Bank's involvement in thedrafting of the Balance of Payments and the power vested in the Dumaessential to appoint and remove the Board of Directors, including theChairman are others. Russia.net. Italso registers credit organizations and issues/revokes the licenses ofthose organizations and their auditors (Central Bank of the RussianFederation, 2 ). If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.