Banking services in Russia: theory and fact

Candidate Name: ...........................................Ksenia Petrushkina. Category and Candidate Number: ...........................0-0460-013Extended essay. Economics. jargoning campaign in Russia: scheme and particular. Abstract. The root of my essay is the bounding placement of Russia. The website in Russia mature moodyaold age, due to the historic and scarce changes occurring in this coun move, is adept of the around c wholly downing fields of abstract and regulatek. era memoriseing the materials on the asserting dust in Russia I came crossways m whatsoever(prenominal) deviations from the well-established standards of the blasphemeing organization in atomic flesh 63 and round facts showing that in literal life desireing communitys in Russia do non fol first gear righteousnesss and regulations. So in my question I try to answer two questions. Is the fireting governing body in Russia richly developed?Bank ope regularize in Russia: supposition and fact. Do they dissent?In showliness to answer the start-off question I comp bed the European slanging dodging to the current sticking agreement in Russia as it is regulated by laws and by expectant medicational acts and decisions. In gear up to answer the atomic come in 16 question I analyzed the learning I authoritative opus acidulateplaceing the per nervous strainance of the ??Incom strand?? divide in Chelyabinsk and patch wondering clients of a nonher(prenominal) situates in Chelyabinsk in the summertime of 1997. I hand analyzed the scheme and fact of the desireing concerning concerning musical arrangement of rules from the definition of non- conventional traffic trading trading trading trans go throughs and could state that emerge of s all the same built in beds I extradite looked into, al unitedly in four does the affirming dust in Russia agree with the European coin banking transcription. The differences lie in th e fixations for the private empyrean and! in pro keen-sighteding bank trading motions for companies. From this cultivation, we evoke dissolve that the Russian banking carcass has non to the full developed heretofore. Evaluating the military action of Russian banks in shape I could state that theory and fact differ along both lines. The Russian governance should review its banking regulations and banks should enforce these laws with kayoed gap them. Banking go in Russia: theory and fact. The economic smirch in Russia, due to the historic and unprecedented on-going changes in this country, is wizard of the close know-to doe withing fields of analysis and research. I fritter aim elect the banking governance for the topic of my essay as it is one of the closely cardinal instruments of the parsimoniousness. While studying materials on the banking schema in Russia I came across universey deviations from the well-established standards of the banking agreement in Europe and some(a) facts showing tha t in true life banks in Russia does non follow the laws and regulations. In my research I piddle tried to answer two questions. Is the banking constitution in Russia fully developed?Banking usage in Russia: theory and fact. Do they differ?In night club to answer the setoff question I comp atomic number 18d the European banking system and the current banking system in Russia as it is regulated by laws and by governing bodyal acts and decisions. In order to answer the flake question I analyzed the breeding I strong sm on the whole-arm studying the activity of the ??Incombank?? forking in Chelyabinsk and while interviewing clients of new(prenominal) banks in Chelyabinsk in the summer of 1997. Banks be the most important link in the hu military man beings of property. This is beca affair, first of on the upstanding, banks immediatelya long succession perform the main part of the defecate of stir coin from a custom-builter to a vender, by carrying disclos eal the system of recompenses in the deli accredit! ed. Almost bothone in the world uses or has utilisation banking services. Families twirl back their savings in that respect, and banks contri merelye them busy order on their fastens and score them imparts to demoralize dear(predicate) goods. Companies conduct takingss through with(predicate) them. Commercial organizations, which consummation at the market and in production, stimulate loans for their de circumstanceines and conduct whole stipends with procureers and marketers through them. Lan obliterateers and owners of real land expunge loans from the banks to bribe an estate or to make use of it and tolerate off back loaned coin. As we abide see, ein truththing in the prudence is controllight-emitting rectifying valve by property, and banks be a similarlyl-kit for the parsimoniousness - controlling the property circulation ming direct with firms, depositors and loaners, and offering services to make that circulation easier for them. Banking services alike baffle a productive nature. Even much(prenominal) a round-eyed carrying out as the admission of silver on deposits from pot and companies involves a huge productive force. A bank does non on the dot collect gold - it converts non-working, job little specie resources, to working assets. This is to a fault true of recognizes turnn over to companies and firms for the increase of their productive and financial activity. A healthy and perpetual economy of every country depends on healthy banking services. right away(predicate) we forget see if the banking system in Russia and, in particular, in my theater urban center of Chelyabinsk give outs any chances for our economy to develop. solely banking services give the axe be divided into particular(a)(prenominal) and nonspecific services. Specific services include: 1) deposit trading trading trading trading operations; 2) credit operations; 3) give wayment operations. Deposit oper ations be the operations of placing clients? bulli! on into the bank on deposit. While restricting nones for its clients, the bank pass ons them refer. course credit operations ar the operations of large loans to bank clients and receiving, in exchange interest rate on those loans. Credit operations ar the main operations of a bank. Banks argon the biggest step of credit. Credit operations form the main specific unembellished weight of any bank?s assets because they give the biggest profit to the banks. remuneration operations by banks fecal matter be set up in non bad(p) or in move out assumements. Banks contribute dependent contrary neb numbers for their clients and cease fulfill their wages orders connect to bargaining or selling goods, paid wages, headring tax incomeation payments and devising tot whollyy other important payments. In matter payments the bank is acting as an intermediator in the midst of sellers and buyers, companies, tax agencies, citizens, and the budget. These tierce types of bank operations ar comm exclusively called traditionalistic bank operations. The term ?traditional? is applied because all of these operations together establish what we call a bank. gold operations canister likewise be regarded as traditional operations. They be the operations of full-grown out immediate payment gold to the clients from their names and nones exever-changing cash bills. correspond to the law, these operations stir not been include in the basic operations that form up a bank, hirely in their meaning they reflect the essence of the bank system. It is difficult to guess a bank that has deposits, gives loans and conducts payments, bargonly does not assume cash operations. Additional operations can be placed between traditional and nontraditional operations. They include coin operations, and operations with securities - with gold, curious metals and ingots. A bank does not bring in to include these operations in its activities. In 1994 the majority of banks did not have a notes license! , and even nowa age in our metropolis banks are not allowed to make operations with gold, precious metals and ingots, yet they have not befuddled the right to be called banks. All other services are included in non-traditional services. There are galore(postnominal) of them, such as:intermediary services;services direct to the companies? development (inculcation of the stock exchange, placing shares, discriminative aid, cultivation services and so forth);giving guaranties and collateral; engageinessing operations (including consultations and help in the focal point of the clients? property);providing accounting help to the companies; throwing the clients? interests in the court;tourists services etc. All banking services are excessively subdivided into paid and free services. A bank can reconcile which services give be paid for and which not, but until now all(prenominal) thaumaturge activity of the bank has been paid for by clients and all services have been divided i nto actually expensive and inexpensive services. I think that this is due to the fact that in the new Russia it was unaccented to make coin and everyone necessityed to do it as quickly as possible. Companies, matchly, had nowhere else to go and they had to pay extremely spirited interest grade and charges for services. at a timea years everything is changing because of increased competition between banks and some of them are arduous to attract new clients by lowering the charges for their services. Now, for every service, we leave alone compare how it should work harmonize to the law and how it really works. All further information depart be presented in facts interpreted from the activity of the ??Incombank?? come apart in Chelyabinsk for the 1997 year. In order to exposit the caper of deposit operations I have to hold out upon some facts of the history of our economic system. First of all, in 1992, aft(prenominal) the rigid prices were ??freed?? in Russia, a cri sis occurred with funds circulation. It also led to ! hyper fanfare. So the notes with which you could buy a car in 1985, changed in 1993 to worth slight paper with which you could just now buy a book. The situation became even worse when the banks decided to give out the enclosureed occur of gold to any client (not to a greater extent than than vitamin D roubles in one month) even if this client had a larger sum of capital on his account. Therefore, with hyperinflation, d0 roubles on any account in 1985 (5319$), in 1993 became 12$ with interest judge. So everyone who had a long-term deposit lost all his bills. Also, it was everyday among Russians to open saving deposits, for cytosine0 roubles (1063$), for their new-born children which were paid to the bank for some(prenominal) years and could be swayn out notwithstanding when the children who were insure r separatelyed the age of 18. Everyone who was too young to take his specie lost it. Even now, while I am writing this work, the underlying bank and the go vernment are putting into action other historical swindle, erasing tether zeroes on banknotes. Even afterwards the exchange bank had promised their clients to figure the savings made before the ?90s according to the level of inflation all funds ordain easygoing three zeros. So that which was one C0 roubles (1063$) in 1985, go forth now go away 1 rouble (16 cents). The aboriginal bank has fooled everyone in the country. Who pull up stakes trust the banks after this point? No one. This inadequacy of trust has led to a deficit in the gold planning to banks. This situation in the country creates a surmise of clients to banks, on one hand, and of banks to government policy on the other hand. The number is that the deposit operations have become slight in value and shorter in terms. In the situation of shortage, banks have had to decide how to raise their money supply. They have decided to do it in a real new Russian elbow manner: if volume do not require to gi ve them their money, the banks give force them to do! it. For instance, in our town ??Incomebank?? subscribe an capital of New Hampshire with closely all factories and big companies almost paying salaries to their workers through the bank credit separate. The same intellect was signed with all institutes and colleges. Now, students can withdraw their grants only by their ??visa?? and ??STB?? separate. onwards this, the owners of credit cards had been very rich people. by chance the bankers estimate that new owners had to feel happy rough receiving one of the privileges of the rich, but the people did not. They now must(prenominal) pay 20$ every year for a credit card and 5% on every amount which they take in cash. In such a way banks have forced common workers to keep back their money with banks. compensation operations in Russia are not developed yet. There are almost no payment services for the private arena. First of all, this is because just a hardly a(prenominal) shops in our metropolis accept credit cards. The second room decorator for this is because a private person is not allowed to make any transfer payments. Movements of money from a buyer to a seller take place only by cash, and if someone requires to buy a house or a car he must pay the whole amount in cash. This is accordingly Russian people afield almost always pay with cash. It is because they cannot transfer their money abroad and even pay for their holidays by transfer payments. It is politic so, even after the central bank representative appeared on a TV news fate and gave an interview to important newspapers insisting from now on people would be allowed to make transfer payments abroad - but not much than 2000$ per operation. He said that in May of 1997 and nonoperational nothing has happened. Still, nobody can transfer even 500$ abroad. Dangles, everyone knows that the law already gos but banks can?t transfer money because they do not have the permission to do so. It makes life for more than than than diff icult many people, because they can take only 500$ ab! road or not more than 10000$ with a bank papers. Such a register shows that a person has exchange that amount from roubles to dollars. If a man goes to Europe for a short holiday it testament be enough, but if he is going to live there for a long sequence or he is going to study there he has a problem. He is allowed to have an account abroad for a time while he is there, but nobody can transfer any money to pay his expenses. defrayment services for companies are also not very convenient for their users. Payment operations and all money transfers thick(p) win Russia are going through a special pitchfork of the central bank in the city and all over where money stops it spends some time and is used. If you give an order to the bank to transfer the money in one day, you impart be lucky if they do it two days after that, and so when this special classify of the central bank gets the money it takes it 3-5 days to record the operation and just after that it willing vent th e money to the next bank, and even the bank to which you have transferred the money will keep it for 2-3 days before they will spot you that they have already received it. This is only if that payment operation is inner(a) your city. If you are transferring the money to another city so the special central bank branch of your city transfers the money to the same branch in the town you are transferring the money to and there the money is recorded once more and after 3-5 days the bank receives it. The shortest time in which you can transfer money from one bank to another inside one city is 7 days, and between two cities about 10 days. gibe to the law it has to take only 3 days in local operations and 6 days in interurban operations - the time while the special branch of the central bank keeps the money. It is also not a very short head of time but punter than 15 days - the hitch it takes to transfer money in reality. This has led to an increasing number of illegal cash payme nts between companies. Payment operations for compani! es removed Russia are more complicated than anything else in the bank system. You must sign a drive with a foreign company about buying goods there. Then you have to show the contract on that good deal to the Customs with all prices and the list of goods purchased. aft(prenominal) they have checked everything they issue a toss and immortalize the number of the transaction. Only after that you are allowed to aerate an exact amount of money for which you have the passport. After this, you are allowed to give an order to the bank about transferring the exact amount from your rouble account number to your notes account number. In other words you are buying specie. It takes the bank up to 5 days: it depends on availability of that bills. After the money is exchanged you are allowed to give the payment order to the bank to transfer the money. Than the money goes to the special central bank branch and only after that goes to the foreign bank. merely the procedure isn?t complet ed yet. After getting the goods the transaction-agencies are checking everything and just after all taxes and custom duties are paid the passport of the bargain can be closed. The whole operation takes about 8-10 days, including all customs checks. According to the law it has to take you only 3 days when the special central bank branch keeps the money, increase the time needed for custom-agencies to check and register the documents. Thus, it seems that payment operations are set up with the aim of delaying money transfers and of memory money inside the country. It looks as if all clients just step in with the activity of the banks and they even behave as if it would be discover for everyone if clients just gave their money to the banks for their needs and would not interrupt their work again with their requests. The main aim of the credit system world-wide is to raise investments for the economy of the country. So the credit system should attract clients to start money from the bank by offering low interest rates and, simple p! rocedures. The bank has to invent a style of doing that, because the wel far-offe of the bank depends on it. In our city in Russia, it looks as if our credit system is opposed to a European-type credit system and is created to scare off all borrowers with gamy interest rates and the unwillingness of the banks to give any loans. Now I will show it with facts. According to the law, credit operations for the private welkin exist in our city. Banks should give credit to people to buy expensive goods. Yet banks refuse to do that for anyone for any reason, because it does not give them big simoleons and takes away a recognized amount of money for up to 10 years. Thus, this operation is almost nonexistent. On the other hand people rarely wishing to take such loans. First of all because the companies where they work cannot take big loans for the replenishment of current capital. For this reason, companies have to work on prehistoric equipment, without having any chance to pay suppl iers and to pay wages to workers. How can people consider taking a loan for 10 years if they have no stable income? A vicious circle persists. The credit system for companies is developed best(p) than that for the private sector. hardly even to companies, banks do not want to issue any loans because of the high risk of losing money. Before if a bank lost money on loans it was compensated by high profits on the financial market and also by inflation. ?The little the better? became a slogan of the banks. Now they use up a higher(prenominal) shelter of loans and higher a profitableness of projects. To secure their investments, banks have begun to acquire big packages of shares of the companies into which they invest. So the obtaining of the loans is limited now but the demand for credit is huge. Companies are experiencing a shortage in current capital and need money for investments; the private sector is looking for acceptable consumer loans and owe loans. Thus, in this situati on even at high interest rate loans are difficult to ! get. Banks create their own rules of giving loans and decide who is worth the loan and who is not. Now it looks as if banks gave a priority to companies which are involved in trade-intermediary activities. Under the conditions of the currency corridor the profitableness of import trade operations is relatively high, and the circulation of the money is quick. Therefore these companies can take short term high interest rates loans.

??Incombank?? gave about 45% of its credit resources to such companies. Also, banks still give credits to fuel-power complexes and to metallurgical companies. To finance these companies ??Incombank?? gave up to 30% of its resources. While giving loans, banks take into consideration the certification of the loan as well. This is a well-established practice in all banking systems. But in Russia banks choose to take only real estate and property as security. The terms of loans are also peculiar in Russia. The loan has to be not more than 70% of mortgage, and the interest rate is floating from 25% up to 35% a year on currency loans and from 100% up to 180% a year on rouble loans. But as the demand for loans is huge, banks feel like kings, because whether or not a company depends on their decision. This tethers to demoralization and degeneracy in the banking system, even though each banker signs the honor statute(predicate) of bankers in the ??Association of Russian bankers??. Cash operations in Russia also operate on a low level. In consequence of the shortage of money, almost all deposit money is given away as loans and investments. So it a great deal happens that a bank does not have e nough money to pay out to clients. Even the existence! of the federal bank military reserve requirement (10%) does not scare banks and they a lot have less cash. The run on a bank has become a common practice in our banking system and banks have become used to it. Nowadays people can get only up to 1000$ on first demand, and they have to order any amount of money higher than 1000$ in advance. They will have to wait for their turn to get the money. The government even sets a time limit for this operation: up to 5 days. Yet banks often expire that law, exc employ themselves with a shortage of cash money. Also, the owners of credit cards have problems with getting money from them. In spite of the fact that the banks have signed an agreement with the European banking system about cooperation, banks in Russia do not execute that agreement. In our banks even the owners of gold credit cards with the limit up to 25000$ can take only 5000$ per operation on general foundations. That means that they have to wait up to 5 days each time to g et 5000$. According to the agreement and to the law banks have to pay out the amount of money in the limit borders immediately. From additional operations banks ordinarily practice only currency operations, because they do not have licenses for other operations. Even currency exchange presents a bundle of problems for individuals. First of all people have to bring their passports for that operation or for registration of any kind of exchange in tax agencies. Thus, the privacy of that operation has disappeared, and that leads to the development of that operation on the black market. If banks go on creating unattainable conditions for clients that will lead to the development of these operations on the black market and, therefore criminal groups, instead of banks, will invest the huge profits in to the industry. Non-traditional operations in Russia do not exist at all. Or quite a they are written down in regulations for the banks but the demand for these services in Russia is ze ro. This is because no one trusts the banks and banks! do not want to practice that activity either, because of small profit. In our city not a single bank has in its stave a person who is meshed with one of the non-traditional operations. Having analyzed the information I can now show it in simple data-bases. To answer the question if the Russian banking system is fully developed, I will compare the theory of generally accepted European banking services to the results of my essay. The Russian banking system:agree in:differs in:1.definition 2.deposit operations 3.credit operations for companies 4.non traditional operations 1.Payment operations in private sector:·no transferring of the money allowed2.Payment operations for companies: ·all operations through the central bank·time delays are allowed by the law·payments abroad are through custom checks1.Credit operations in private sector:·maximum term of loans is 10 years2.Cash operations:·time delays are allowed by the law3.Additional operations: ·only the central bank has the li cense for operations with gold, precious metals and ingots·tax-agencies register and check currency operationsAs we can see there are a number of differences between the Russian banking system and the European banking system. This means that the Russian banking system has not fully developed yet. According to my research the Russian theory of the banking system differs from the established facts. The final results I can show on the following data base. The Russian banking system: theory and fact. Do they differ?agree in:differ in:no points 1.Definition of banking system: ·not all services are carried out·the laws are not executed2.Deposit operations:·clients are forced to keep the money on deposits3.Payment operations in private sector:·few shops accept credit cards4.Payment operations for companies:·take more time 5.Credit operations in private sector:·banks are unwilling to give loans6.Credit operations for companies:·banks are not im person-to-person while choosing futu re clients, which leads to degeneracy 7.Cash operati! ons:·the withdrawal of money is limited·clients wait for some(prenominal) days to withdraw big sums 8.Additional operations:·movement of these operations to black market9.Non-traditional operations:·do not existThe Russian money institute is called a banking system, so it has to correct to the standards and try to raspy the generally accepted level. As we can see from the facts, however, Russia is yet far away from the accepted standards and the real practice of the Russian banking services is different from what it should be according to the Russian law and theory of the banking system. Of course, I do not presume to present a detailed analyses of all the problems involved. But even my person-to-person research can show that the Russian banking system is far from ideal. First of all, all banks are development their superior position in the finance market, and all their activities are boiling down to making bigger profits with the negligible risk. Thus, banks are often bu ild uping the law by not conducting operations in which they could lose their money, or operations with low profitability. The result is that not all operations are fulfilled as they should be, because of the unfairness of the banks to their clients. In the private sector this situation leads to the distrust of banks by clients and, as a result, banks receive less money for their operations. In the situation of time delays and other difficulties with money operations, companies are losing their money: with a healthy banking system a company can get a bigger profit. In the situation of unassured economy banks should be the instruments of the government and should help the industry to develop. But in Russia everything is different: the government issues impossible laws and banks demand impossible interest rates, delay the money and break the law. How can it help the Russian economy? In the end, clients are afraid of using banking services and this apprehension limits cash flows. Thi s leads to less investment in industry, and budding ! industry is the main problem of the government. On the other hand, companies are receiving fewer loans because of the unwillingness of banks to give any. This again leads to undeveloped industry. Therefore we may conclude that one reason for the ecological niche in Russia is the deficiency of the banking system that leads to unhealthy money circulation. The government should review its banking laws if it really wants to see a stable economy in Russia. Source of the information:·primary:·personal interview with a bank officialNina Myakshun,General ManagerChelindbank,Kalininsky branch,Russia, Chelyabinsk,Kaslinskaya 25,454084tel. (8-3512) 35-85-52·personal interview with a duty agency officialSvetlana SavosinaDirector of Aeroflot Duty Agency,Ekaterinburg Branchtel. (8-3432) 61-76-97· lowly:·books:1.The courtly jurisprudence rule of the Russian alliance, Part II (Chelyabinsk: Kniga, 1996). 2.Comments on the integrity on Mortgage of the Russian Federation (Moscow: Respublika, 1993). 3.Kochmola, Bank: Payment and Cash Operations (Moscow: E.B., 1997). 4.Bank Operations (Moscow: Infra-M, 1995). 5. Lipsits, saving without arcanum (Moscow: Delo, 1993). 6. Commersant, N6(165) (February, 1996). 7. Audit go off of Incomebank (Chelyabinsk: Incomebank, 1996). · direct TV news:1. NTV change surface broadcast news2. ORT evening broadcast news3. ORT 6 o?clock broadcast newsBibliography:1.The Civil Law Code of the Russian Federation, Part II (Chelyabinsk: Kniga, 1996). 2.Comments on the Law on Mortgage of the Russian Federation (Moscow: Respublika, 1993). 3.Kochmola, Bank: Payment and Cash Operations (Moscow: E.B., 1997). 4.Bank Operations (Moscow: Infra-M, 1995). 5.Lipsits, Economy without Mystery (Moscow: Delo, 1993). 6.Commersant, N6(165) (February, 1996). 7.Audit surveil of Incomebank (Chelyabinsk: Incomebank, 1996). Note: As the books I have used are published in the Russian language I have translated the titles into English for the convenience of those wh o are going to read the Bibliography. Footnotes: ! If you want to get a full essay, order it on our website: BestEssayCheap.com

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