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Financial Systems and Financial Reforms in CIS Countries

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  • Inna Golodniuk

Abstract

At the beginning of 1990s the Soviet successor states started to transform their financial sectors to meet the needs of the emerging market economies. Following a decade of transition, results differ. Although the Baltic States were able to build quite successful financial systems, in the CIS countries financial systems remain a major obstacle to economic growth. The hyperinflations of the early 1990s, the financial scandals that followed the collapse of monobank systems, and subsequent incomplete progress in constructing non-bank financial institutions and effective regulatory structures have had adverse consequences. These include weak bank balances sheets, high real interest rates, and poor access to capital for small enterprises and start ups. With a few exceptions, nontransparent regulation, inadequate disclosure frameworks, and weak protection of shareholders rights continue to limit investor participation in CIS financial markets. The absence of effective threepillar pension systems further limits the demand for domestic debt and equities. Fortunately, there are signs of improvement. Bank lending and deposits are growing in many CIS economies, the proportion of bad debt in bank credit portfolio is falling, and lending and deposit interest rate spreads are diminishing. The solid economic growth recorded since 1999 in many CIS countries is helping memories of the 1998 financial crisis to fade, and stock exchanges in some CIS countries are currently at or near record levels. Financial systems in CIS economies may be moving toward the successful frameworks put in place in the new EU member states. However, because they have not benefited from the extensive foreign direct investment that recapitalised banks in Central Europe, financial stability in many CIS countries remains open to question. This paper is built as follows. Chapter 2 overviews major reforms in bank and non-bank financial institutions after 1991 followed by analysis of changes in ownership (Chapter 3) and changes in market structure (Chapter 4). Chapter 5 discusses the major trends in the CIS financial sectors and Chapter 6 concludes.

Suggested Citation

  • Inna Golodniuk, 2005. "Financial Systems and Financial Reforms in CIS Countries," CASE Network Studies and Analyses 0306, CASE-Center for Social and Economic Research.
  • Handle: RePEc:sec:cnstan:0306
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    References listed on IDEAS

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    1. International Monetary Fund, 2004. "Republic of Kazakhstan: Financial System Stability Assessment-Update including Reports on the Observance of Standards and Codes on the following topics: Banking Supervision and Anti-Money Laundering a," IMF Staff Country Reports 2004/268, International Monetary Fund.
    2. World Bank, 2003. "World Development Indicators 2003," World Bank Publications - Books, The World Bank Group, number 13920.
    3. Lajos Bokros & Alexander Fleming & Cari Votava, 2001. "Financial Transition in Europe and Central Asia : Challenges of the New Decade," World Bank Publications - Books, The World Bank Group, number 14012.
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    Cited by:

    1. Dastan ASEİNOV & Kamalbek KARYMSHAKOV, 2018. "Development of the Banking System in Kyrgyzstan: An Historical Review and Current Challenges," Sosyoekonomi Journal, Sosyoekonomi Society.
    2. Dr. Rezarta Shkurti (Perri) & Dr. Brunilda Duraj, 2010. "The Assessment Of The Financial Soundness Of The Banking Sectors In Balkan Countries Using "Early Warning Indicators" - A Comparative Study With Policy Implications," Journal Articles, Center For Economic Analyses, pages 33-48, June.

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