The Imperial Bank of Russia was established in 1860 with a capital of 25,000,000 roubles. It is wholly a government institution, controlled by the Czar, and has no connection whatever with private individuals, except to the extent of its daily business transactions. It thus partakes of the imperialistic character of the government in a decided degree. As has been expressed by one economic writer, it "is as if we had a bureau in the Treasury Department with power to do a great and varied banking business and with branches all over the country." Unlike the Bank of England, the Bank of France, or the Reichsbank of Germany, which are formed by means of private capital, the Imperial Bank of Russia is merely the Russian Government engaged in the banking business with its own capital and for its exclusive profit. In 1896 the capital of the bank was increased to 50,-000,000 roubles. It issues the paper money of the empire exclusively. The issue and the commercial banking departments are kept entirely separate, upon practically the same plan as that followed by the Bank of England.

Paper money is the actual medium of exchange in Russia. Notes are issued in denominations of 100, 25, 5, 3 and 1 roubles and are full legal tender. Specie payments have been suspended since 1855. The paper rouble is worth 66 2/3 copecks, there being 100 copecks in a rouble. The authorized circulation of paper currency based upon the credit of the government is 769,342,911 roubles. This is fiat money. Above this the note issues, if any, must be covered by the deposit of an equal amount of coin. The total circulation, both covered and uncovered, is about 1,100,000,000 roubles, and the metallic cash in the bank vaults is in the neighborhood of 700,000,000 roubles, of which less than twenty millions are in silver.

Although the bank holds what is called a redemption fund, there is no provision made for the redemption of the notes. The stock of gold which is held is merely for the purpose of establishing confidence in the minds of the people, preventing fluctuations or depreciation of the paper currency and holding the Circulation value of the paper at a fixed rate in proportion to gold. Under this policy the rouble has been practically stationary in value during the past ten years, and its value has been fixed by exchange at 66 2/3 copecks, or, one gold rouble as equivalent to one and one-half paper roubles. The paper currency is thus given a fixed value and the two roubles - paper and gold, circulate side by side at the agreed value of three to two. The government has accumulated its gold reserve by retaining most of the gold product of the Russian mines in recent years.

The commercial banking department of the Imperial Bank of Russia exercises all of the ordinary functions of a bank of deposit. By means of its one hundred branches scattered throughout the empire, the Imperial Bank has been able to reach the people and supply needed banking facilities in a fairly satisfactory measure. The policy of the present Czar is to develop the almost limitless resources of the country, and to this end the government, through its bank, is very liberal in making loans, frequently taking risks which would not be regarded as safe according to the usual rules of credit. The government no doubt is willing to take some risks for the sake of the general betterment of the country, and it can afford to make unusual loans since it has extraordinary power to punish delinquent debtors.

Loans for development purposes are regarded with especial favor by the loan department of the bank, since new industries in all parts of Russia are much desired by the Czar. Agricultural loans are a prominent feature of Russian banking. These consist of loans made to small farmers upon a pledge of their products, or the guarantee of individuals who may be regarded by the bank as trustworthy. Loans are also made to mechanics and manufacturers upon pledges of their products. In both this and the agricultural class of loans the property pledged remains in the possession of Loans the producers, and the loans are made for long terms - until the products can be marketed. This system results in some losses to the government, but the general benefit to the country by stimulating industry is believed by Russian statesmen to more than compensate for the percentage of losses.

It will be seen from the foregoing description that the Russian banking system is not a complicated one, since no private capital or individual management is involved. Its volume of circulating medium is dependent upon the will of the government, and is limited only by the amount which will circulate without serious depreciation. As previously stated the paper currency is worth but 66 2/3 per cent. of gold, but the government aims to hold it at this point. This can only be done by strengthening the gold reserve, and the financial policy of the government is to do this. In case of hard times the government increases the volume of money sufficient to slightly raise prices and stimulate production. This is the elasticity of the Russian system of currency.