Vladimir Putin announced irrevocable certificates for a period of three years, covered by an increased insurance limit of 2.8 million rubles.

A new type of savings may appear in Russia – an irrevocable certificate for a period of three years, covered by an increased insurance limit of 2.8 million rubles. Such a tool was announced by Russian President Vladimir Putin. He said that the rate on such instruments may be higher than on regular deposits. The question of how banks will be able to offer higher rates on them remains open. Now the share of long-term money is extremely small – deposits with a maturity of more than three years account for only 1.6% of citizens’ bank savings.

Russian President Vladimir Putin, during the announcement of his message to the Federal Assembly on February 29, proposed launching a new instrument – irrevocable savings certificates. According to him, it is assumed that the effect of such an instrument will be long-term and will be at least three years. One of the main distinguishing features is that the insurance limit for them will be 2.8 million rubles. This amount is twice as much as the current volume of insurance of funds in accounts and deposits (RUB 1.4 million).

“The certificate will be irrevocable, which means banks will be able to offer clients higher, more profitable interest income,” noted Vladimir Putin.

Nowadays, banks offer various types of savings, and some of the most popular are deposits and savings accounts. Against the backdrop of rapid growth in rates, a flow of citizens’ funds into short-term instruments is recorded. The Central Bank has already drawn attention in one of its reports to the “sharply decreased maturity of household deposits.” According to the Central Bank, at the beginning of February 2024, citizens kept almost 44.9 trillion rubles in banks. Of this amount, 29.9 trillion rubles are kept on deposits, the rest is in current accounts. According to data at the beginning of the year, citizens kept only 728.3 billion rubles on long-term deposits (over three years). (1.6%).

It is also worth noting that the majority of citizens’ funds are kept in the top five banks (top 5 by assets), which accounted for 31.6 trillion rubles at the beginning of 2024. The average maximum rate on deposits in the top 10 largest banks in terms of attracted volume in the second ten days of February was 14.86% per annum, with a key rate of 16%.

In the 1990s and 2000s, banks actively offered irrevocable certificates to clients, but later curtailed such programs due to the fact that they were often bearer, that is, anonymous, notes the head of the internal audit and risk management department of the FBK audit and consulting group Roman Koenigsberg. In this case, we will most likely talk about personalized certificates, the expert suggests. Such an instrument, in his assessment, is designed to solve the problem of the shortage of long-term money in the economy and transfer a large overhang of household funds placed for a short period of time into long-term ones, through which long-term infrastructure projects will be financed.

“The idea is sound, but it should be of interest to both banks and the public. Banks may be interested in it from the point of view of liquidity management; from the point of view of the population, it is a rate and increased insurance,” the expert sums up. However, the question remains open as to how and at what cost banks will offer an increased rate on such instruments in contrast to ordinary deposits. Mr. Koenigsberg believes that in this case there may be marketing tricks. For example, by announcing a high rate with the condition of paying interest at the end of the term of the financial instrument. Over a long period, the effective rate (comparable to the annual deposit) may be significantly lower than the nominal rate. Or differentiation of rates can be ensured by lowering rates on short-term deposits. At the same time, the regulator has the opportunity to influence the profitability of instruments depending on their urgency. For example, through changing the rates of deductions to the deposit insurance fund or mandatory reserve rates.

The President of the Russian Federation also recalled new insurance guarantees and tax deductions for citizens’ investments in the stock market. “It has already been decided that voluntary savings in non-state pension funds in the amount of up to 2.8 million rubles. will be insured by the state,” he noted. Indeed, the bill to increase the threshold for reimbursement of citizens’ funds to non-state pension funds from 1.4 million rubles. up to 2.8 million rubles. was adopted by the State Duma in April 2023. In addition, at the beginning of February 2024, the government approved amendments to the second reading of the legislation, which introduced a single tax deduction for personal income tax for long-term savings (within 400 thousand rubles per year). The bill was adopted in the first reading in May 2023. In addition, by March 1 (on instructions from the President of the Russian Federation), the Ministry of Finance and the Central Bank were supposed to develop amendments to the legislation providing for the insurance of citizens’ funds on the third type of IIS in the amount of 1.4 million rubles. From January 1, 2024, citizens were able to open such IIS to replace existing accounts of the first (with a tax deduction on the annual investment amount of 400 thousand rubles) and the second (with a tax deduction on profit received) types.

Olga Sherunkova