The relationship between financial-sector development and economic growth has long been the subject of much debate. However, a growing body of recent empirical work strongly supports the proposition that financial development contributes to growth over the long term. Moreover, there is evidence to suggest that the intermediation-growth link is stronger for less financially developed countries, such as Russia. There are good reasons to believe that the development of the banking system in particular will be critical to sustaining the growth of investment and output in Russia over the longer term (see Chapter 1). Given the limits on its current ability to attract foreign investment and on the capacity of firms outside the resource sectors to finance investment from retained earnings, Russia’s growth will depend to a great extent on the effective mobilisation and intermediation of ...