How the Federation Council proposes to protect IIS
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Within a week, the State Duma may receive a bill on insuring individual investment accounts in the event of broker bankruptcy. Kommersant FM was informed about this by the Federation Council Committee on Budget and Financial Markets. The document will concern long-term investments of citizens. This initiative is being developed following the results of the recent presidential address. Vladimir Putin has repeatedly called for the creation of an insurance mechanism for individual investment accounts. However, in 2023, deputies rejected a similar bill. What is this connected with? And is it worth insuring IIS? Vladislav Viktorov sorted it out.
On March 6, Federation Council Speaker Valentina Matvienko announced that senators had prepared a bill to protect citizens’ private investments. However, she did not specify what exactly was being discussed, noting only that the initiative was developed as a result of the president’s message.
In his speech, Vladimir Putin mentioned that the authorities have already agreed on two mechanisms that should stimulate long-term investments – insurance of voluntary savings in non-state pension funds and long-term individual investment accounts.
As Kommersant FM found out, the document, which should be submitted to the State Duma within a week, concerns specifically the new IIS of the third type. Moreover, it will talk about insurance in case of bankruptcy of a broker, said Nikolai Zhuravlev, a member of the Federation Council Committee on Budget and Financial Markets:
“Insurance of individual investment accounts is not a government guarantee, like the DIA. It goes through a joint fund, which will receive contributions from brokers and market participants. In case of an insured event, citizens will receive compensation in the amount of their contribution to the IIS.”
Judging by recent statements by the first deputy chairman of the Central Bank, Vladimir Chistyukhin, the regulator, together with the government, began work on this initiative a month ago. Vladimir Putin gave such an order back in mid-January. Moreover, we were talking about insurance of 1.4 million rubles. However, how the mechanism will be arranged is still unknown. In his address to the Federal Assembly, the president said that the tool should help double the capitalization of the stock market by 2030. And it is possible to at least get closer to this indicator if investors are confident that part of their funds are protected, believes independent expert on financial markets Alexey Bushuev:
“The key point in this whole matter is the word “long-term.” That is, the work is aimed specifically at long-term tools. And there is a need for these funds to be provided specifically for long-term investments with the tax benefits that are assumed in IIS-3, with insurance. And then it becomes quite an interesting tool. Moreover, it is being developed for a mass client, but in fact it can become a very important option for VIP clients, who can work with the most risky part of their capital.”
It is noteworthy that in 2023, deputies rejected in the second reading a similar bill on individual insurance insurance in case of bankruptcy of brokers. The document has been under consideration since 2017. As the head of the State Duma Committee on the Financial Market, Anatoly Aksakov, explained, the interested parties could not agree on where to get the money to finance the fund, as well as what the size of the contribution should be. Financial market expert Andrei Barkhota does not rule out that problems may arise this time too:
“Given that mass bankruptcy of brokers has not been observed and this is unlikely to happen, the main dilemma is how much market participants should contribute to insure brokers. And there are large brokers, and there are very small ones, how much should the volume of investments be differentiated for them? That’s why we see a lack of consensus in the market.
Another borderline manifestation is related to the fact that very small brokers will deliberately go bankrupt, because they will begin to fall under the insurance system, and it turns out that more stable market participants will pay for bankruptcy.”
Kommersant FM’s interlocutors do not rule out that even now the bill on IIS insurance will not be approved. Unless the matter is helped by the fundamental desire of the deputies to carry out the president’s instructions. By the way, the head of the State Duma Committee on the Financial Market, Anatoly Aksakov, assumed that the document could be adopted in the spring session.
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