«Investment Banking in Russia, 1890-1917: From Pioneering Finance to Universal Banking Sofya Salomatina Moscow Lomonosov State University The chapter ...»
Uppermost there were the risk of drop in stock prices and immobilisation risk of assets, placed in industrial credits. It became obvious through the crisis that the immobilisation of banks’ resources in industrial projects had reached substantial sums of money in 1895-1899. Since 1899 77 Sofya Salomatina, ‘Modeli kommercheskikh’, op. cit., p. 342.
78 Ibidem, p. 343.
21 banks unwittingly had proved to be owners of huge holdings of unsalable industrial stock and they were reluctant to act not as investors but as governing owners of companies founded or reorganised in the 1890s.
In short-term perspective the substantial own funds and reserves of “investment banks” appeared very important in crisis management, as well as banking system’s support by the Ministry of Finance and the State Bank. The government role in investment banking development deserves a special consideration. This subject doesn’t refer to government contractual work to industrial companies, whose influence on market is often overestimated. The state affected investment banking deeply as the principal Russian issuer, the currency regulator, the main supervisor of companies’ promotion, the lender of last resort. At the same time the byproduct of state patronised policy towards financial institutions was a regular attempt of largescale bankers to do business relying upon government participation or support, although their expectations were not always lived up. But state support was ineffective for development of middle- and long-term risk management in investment banking after crisis at the turn of the 20th century. The 1900s were spent on elaboration of a new stable banking model, which was found in universal type of bank.
By the 1910s the banks acquired broad experience of investment banking and they cleared up their relations with industrial companies. In the issue the banks integrated investment banking into universal banking. Particularly banks, concentrated on investment in the 1890s, had restored credit networks and developed numerous branches before WWI. The provincial branches became an abundant source of deposits and trade and industrial credit customers, whereas the investment activity concentrated at banks’ head offices in Petersburg and Moscow. A Russian universal bank always developed international banking as well, this field was provided by strong foreign department, managed several branches abroad. In the 1910s the universal model predominated at the Russian banking system. Those banks which kept adherence to any other specialisation were gradually sidelined. The fast growth of universal banks signified forthcoming period of redistribution of forces in banking system but this trend would not be put into effect due to collapse of the empire.
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