SOVIET BANKING SYSTEM. The banking system of the U.S.S.R. was introduced with the establishment of the State Bank of the U.S.S.R., which commenced operations on November 16th, 1921. It was for a time the only bank in the Union. The reason for this was, that the civil war, the Decree of December 14th (27th), 1917, for the nationalisation of the banks, the cur tailment of the money system and the exchange of commodities on a money basis, caused the old credit system to disappear.
When the civil war came to an end in 1921, and the so-called "New Economic Policy" was introduced,—which, among other things, implied the restoration of the money system and the ex change of commodities on a money basis,—the Soviet Government realised the necessity for having a banking system in the country. It commenced by establishing the State Bank for the operations of which, funds, in the form of the paper currency in circulation at the time, were allocated from the Treasury. Soon, other credit mostly State, municipal and co-operative, began to spring up and by the middle of 1928 a number of banks of differ ent types were in being.
Of these types of banks the principal are: (a). Long term credit banks, in which are included: The Indus trial and Electrical Long Term Credit Bank of the U.S.S.R., known as the "Prombank,"—the function of which is to accumu late funds for providing long term credits for the purpose of en larging existing and erecting new factories and works for industry and electrification; the Central Municipal and Housing Bank of the U.S.S.R., known as the "Tsekombank,"—the function of which is to finance house building in towns and the development of municipal enterprises; and finally, the Central Agricultural Bank, —the function of which is to provide credits for agriculture.
(b). Municipal Banks, operating with funds provided mostly out of local budgets. Their function is to finance local industries, local housing and municipal enterprises. On July 1st, 1928, 116 such banks (incl. branches) were in operation.
(c). Co-operative Credit Banks, like the "Vsekobank," the "Ukrainbank" and several other banks, which provide credits for the various types of co-operative enterprises.
Counting the branches of the State Bank, and the rural banks connected with the Central Agricultural Bank, the total number of credit institutions in the U.S.S.R. on July 1st, 1928, may be put at 1,291. (In this are not included Agricultural Credit unions numbering 47 on the said date, and the smallest rural banks—so called Agricultural Credit Societies, numbering about 9,000.) In addition, there are in the U.S.S.R. 15,138 savings banks, which take deposits, but engage in no active transactions.
The predominant role in the Soviet Banking system is played by the State Bank. A year after it was established, the Govern ment granted the Bank power to issue its own chervonetz notes. In issuing these notes the State Bank took measures for the im provement of the circulation of currency. Chervontsi began to be issued towards the end of 1922.
By the end of 1924, the last of the depreciated Soviet roubles were withdrawn, and the depreciation of the currency, that had been going on for several years, was stopped.
The State Bank issues bank-notes—chervontsi—in accordance with the Act of October 11, 1922. This Act provides for the issue of chervontsi in denominations of : I, 2, 3, 5, Jo, 25 and 5o chervontsi. (I chervonetz is equal to the previous, Russian gold, ten rouble piece, i.e., 7.74234 grammes of fine gold.) The State Bank notes have a backing of precious metals and stable foreign exchange to an amount of not less than 25% of the issue.
Simultaneously with the State Bank notes, other currency is in circulation, viz., Treasury notes, in denominations, expressed in gold roubles, of 5 roubles, 3 roubles and one rouble, and also silver, copper and bronze coins, in denominations of one rouble and less. The Treasury notes and coins are not issued by the State Bank, but by the Commissariat for Finance ; they are actually put into circulation, however, through the State Bank.