The Russian banking sector is quite underdeveloped. The sector is also small in terms of assets and capitalization. To put this in perspective, the amount of capital in Russia's banking sector is roughly equivalent to one-seventh of the capital base of Citigroup in the United States. Except for Sberbank, Russian banks take very few deposits and make few loans. The role that Russian banks do play may be divided into six areas.
Banks act as the financial arm of large enterprises or groups of enterprises.
A good example would be Gazprombank, the financial arm of gas behemoth Gazprom. Until August 1998, banks were lenders of last resort to the central government in Moscow and were chief purchasers of the government's treasury bills or GKOs. Russian banks also fulfill a treasury function for the central government. Outstanding Issues Reform of Russia's banking system will be critical to the country's long-term economic development. Without a banking system that fulfills the function of financial intermediation, efficient capital accumulation is highly unlikely in Russia's financial system.