Banking Sector and Financial Intermediation in the Russian Transformation Process

The actual financial crisis in Russia is probably the most visible sign for a preliminary default of Russia’s transition from a centrally planned socialist to a market economy. The crisis was mainly triggered by the sudden decision of the central bank to allow for a more or less floating exchange rate of the ruble and the default of the central government on its current liabilities, most importantly its short term bondsi. Many strategic mistakes including far-reaching measures concerning internal and external liberalization aspects without taking care of necessary adjustment processes, a single-minded attention referring to stability factors as indicators for transition success and a extreme loss of credibility on behalf of the public authorities led to this economic and social disaster (WELFENS, 1998; RECEP, 1998; IMF, 1999). After nearly ten years of rather chaotic transition, it is now necessary to adopt a true strategic economic concept that tries to achieve not only monetary stability but also create stable political and legal conditions and to improve the functioning of the states’ democratic institutions.