ABSTRACT
The banking system in the planned economies developed along the same contradictory lines as did the economy as a whole. The distinctive feature of the banking system in a planned economy is the fact that nationalized banks are state and cooperative property, and function on that basis. Banks are only one of the instruments of economic control, one link in the state steering mechanism, a state-owned money institution in a state-run economy. Since there is no way in a state economy for state credit to evolve naturally, its scope had to be defined and lines drawn between areas where enterprises should use their own funds and those where credit could be used. The Soviet banking system –which had served as a model for the whole Eastern bloc –was modified considerably as a direct consequence of the economic reforms.
