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Banks on a tight leash

Belarus's small banking system has remained a sideshow during the tumult of recent years, while some of the most advanced of Europe's transitional economies suffer.

       
Valentin Treshchev

Although even some of the most advanced of Europe's transitional economies have suffered spectacular banking crises as a result of directed lending to unprofitable enterprises, Belarus's small banking system has remained a sideshow during the tumult of recent years.


Because of the country's long period of high - sometimes hyper - inflation, deposits and assets are among the lowest in the region. At $2.4 billion, combined assets are equivalent to those of the tenth-largest Russian bank. And although there are currently 24 operating commercial banks, the lion's share of assets are held by a half-dozen specialized, "system-forming" institutions, all tightly controlled by the state. The banks have been routinely directed by the state to provide credits at unprofitable rates - sometimes at 100 percentage points below the effective refinancing rate. Many of these have gone to agricultural firms and other troubled borrowers, often with implicit but unenforceable state guarantees.


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