Russia's financial freedom

The 2011 Economic Freedom Index was released by the Heritage Foundation and the Wall Street Journal, where Russia ranked 143, squeezed between Seychelles and Ethiopia. Here's what the report says about financial freedom in Russia: 

As far as the Financial Freedom Index is concerned, Russia’s small, undeveloped financial sector remains vulnerable to heavy government influence, the report noted. State-owned banks continue to dominate the banking sector and account for over one-third of the sector’s total assets. Despite improvements to the banking regulation in 2006, bank supervision and transparency are insufficient, the report says, stressing that the more than 1,000 licensed and registered Russian banks are generally small and undercapitalized. Another drawback, according to the report, is that capital markets are relatively small and are dominated by energy companies. However, the global financial turmoil appeared to have provided an impetus for bank consolidation with more than 60 banks eliminated. But the government prevented the closure of large lenders while channeling large amounts of state funds to prop up failing financial institutions, according to the authors."

And here's a graph of the financial freedom in Russia (in blue) vs world average (in black):

So on the one hand, the report draws a rather pessimistic picture of the institutions supporting the Russian financial sector, but on the other hand, complex financial instuments are also sold in the Russian market (and good luck finding structured products in Ethiopia). 

Is this combination of institutional backwardness and complex financial instrument a problem ? Is there any effects on the level of financial litteracy and/or the level of public trust ? What are the institutions needed to support a complex financial sector ? 

Does it really matter ? I hope so, because this is what I am writing my PhD about.