The Soviet revolution in banking

By Laurence Bromhead

That was the day when the Tartu Commercial Bank, of the city of Tartu, in the Republic of Latvia, registered as a commercial bank with Gosbank (the state bank of the USSR) and the Soviet Ministry of Finance. It was the first of 121 new commercial banks to be formed so far, with a total capital amounting to 2,243 million roubles.

Co-operative banks, too, are springing up all over the Soviet Union. Chimkent Co-operative Bank, known as Soyou-Bank was the first to register. It has been followed by another 75 institutions. Their total capital stands at Rb383 million.

The appearance of the new banks marks the end of a centralised bureaucratic system which had survived intact from 1927, when development was frozen and convertibility of the rouble suspended. The system comprised Gosbank and Stroibank, the Bank for Financing capital investments. Gosbank controlled a third entity, Vneshtorgbank, the Bank for Foreign Trade.

Perestroika changed all that. The first steps were taken in early 1988 when Gosbank became a regulatory rather than an executive institution. Five specialised banks were set up to handle different sectors of the economy.

The new system was still centralised and too inflexible to meet regional requirements. So a team of Gosbank officials produced recommendations which led to business enterprises and local organisations being allowed to form banking subsidiaries, providing capital through deposits. Co-operatives were also permitted to set up banks. The move followed new legislation allowing the growth of private labour – self-employment – and self-help schemes, including housing developments.

Euromoney has been able to compile a full list of the new institutions with the help of Soviet officials. Only a "couple of dozen" are actually up and running, according to Dimitry Touline, at the state bank. It's clear, though, that they mean business. Inquiries by Euromoney produced swift responses by telex and fax.

Individual banks that Euromoney contacted emphasised their interest in establishing relationships with foreign partners. Andrew Souckharew, chief general manager of InvestBank, Kaliningrad, lists "integration with the international bank system" as a priority. "Co-operation with foreign partners and first of all small and average-size banks," is an aim of Bakhytbek Baiseitov, president of Centrebank, the Alma-Ata Central Co-operative Bank.

Outside influences are already beginning to penetrate the Soviet banking systems at higher levels. The authorities agreed in October to the formation of a joint venture, the International Moscow Bank (Intermosbank). Western banks have a 60% stake spread equally between Creditstanstalt, BCI, Bayerische Vereinsbank, Credit Lyonnais and Kansallis-Osake-Pankki. The Soviet partners are Vnesheconombank, Promstroybank and Sberbank, the huge savings institution.

Intermosbank is already gearing up. It's buying technical systems, preparing to establish a head office and working out its role within the domestic banking system. Departments have been set up to cover corporate lending, project financing and credit risk and analysis.

Euromoney expresses thanks to all those who helped in the compilation of this feature, including: Dimitry Touline, manager, Gosbank, Moscow; Yuriy Ponomarev, Eurobank, Paris; Martin Digglemann, BFEA. Zurich; and Margaret Wood, Moscow Narodny Bank, London.