Are all funds protected in Russian banks?

ArmInfo. once said Lucius Annaeus Seneca, the famous Roman Stoic philosopher, poet and statesman To ensure the safety of our hard-earned money, the modern world has come up with a system of guaranteeing bank deposits.

The Russian mandatory deposit insurance  system (DIS) was created in late 2003, with the State Corporation  (DIA) serving as the system's operator  since January 2004. Natalia Fedorova, Deputy General Director of the  state corporation , shared in an interview  with ArmInfo how the system functions and to what extent  bank deposits in the Russian Federation are currently insured by the  state.

- This year marks the 20th anniversary of the Deposit Insurance  System. As the DIA enters its third decade , what indicators will  define its future?

- Today, 592 banks are part of the deposit insurance system, 296 of  which are in liquidation: Any bank that attracts funds from  individuals is a participant and pays contributions to the compulsory  insurance fund.  From this fund, the DIA transfers insurance  compensation to depositors when a bank's license is revoked.   Currently, the insurance compensation limit per depositor in one bank  is 1.4 million rubles (5.5 million AMD). For certain types of  accounts (escrow accounts opened for the purchase of real estate or  participation in shared construction) and funds received under  special life circumstances, there is an increased limit of 10 million  RUB (39.8 million AMD).  We started with 100 thousand RUB, and the  range of protected deposits was much narrower. Previously, these were  only accounts of individuals, now we insure funds of small and medium  businesses, individual entrepreneurs and non-profit organizations. In  fact, only funds of large companies are left uninsured.

- When was the amount of insurance compensation last revised?

- Over the 20 years of the deposit insurance system's operation, the  maximum amount of compensation for regular deposits has changed  several times: in 2004 it was 100 thousand rubles, in 2006 it was  increased to 190 thousand rubles, in 2007 - to 400 thousand rubles,  in 2008 - to 700 thousand rubles, from December 19, 2014 - to 1.4  million rubles.  In 2015, an increased limit of insurance  compensation was introduced - up to 10 million rubles for escrow  accounts opened by individuals for settlements under real estate  purchase and sale transactions. In 2018, it was extended to escrow  accounts opened for settlements under contracts for participation in  shared construction of an apartment building, and in 2022, to escrow  accounts of participants in shared construction of individual  residential buildings.  Starting from March 1, 2025, escrow accounts  opened for settlements under construction contracts for individual  houses will be insured for 10 million rubles.  In 2020, the amount of  insurance compensation for an individual depositor for an account  where funds were received under special life circumstances increased  to 10 million rubles. For example, if a person received money from  the sale of an apartment, as an inheritance, or as a grant from the  state. The current insurance compensation limit covers the funds of  almost 98% of depositors. That is, the savings of only 2% of  depositors remain outside the limit, but these are fairly wealthy  people with a good level of financial literacy. They are able to  protect their savings on their own.

- Given the increasing geopolitical risks, the question arises: will  Russia raise the minimum level of guarantee for bank deposits?

- Currently there is a discussion about doubling the limit of  insurance compensation  to 2.8 million rubles for deposits with a  term of more than 3 years, which are backed by  irrevocable savings  certificates. The corresponding bill has been published for public  discussion on the federal portal of draft regulatory legal acts. It  is expected that the limit will be raised by the end of 2025.  The  economy is in need of long-term funds at the moment. Increasing the  level of protection for long-term deposits will encourage depositors  to invest funds for an extended period.

- In the modern world, currency risks are growing. With this in mind,  it is possible to expect a revision of the ratio of guaranteed  deposits in national and foreign currencies, perhaps to attract  deposits in foreign currency? It would also be interesting to know   the share of foreign currency deposits in Russian banks, such as at  the beginning of 2020 and now?

- We have funds insured in any currency up to a certain amount. If a  bank's license is revoked, and you have a foreign currency deposit  there, you will receive insurance compensation in rubles at the  exchange rate of the Bank of Russia on the day of the insured event.   At the beginning of 2020, the share of individual deposits in foreign  currency was 19.7%. Now that figure has decreased significantly: as  of November 1, 2024, the share of individual deposits in foreign  currency is 7.5%. This figure is not significant for the Russian  economy, so there is no reason to set a separate limit.

- How many insurance claims has your Agency had to handle over the  past two decades?

- There have been a total of 554 cases. The DIA paid out more than 2  trillion rubles in compensation,  4.4 million depositors received the  funds. The peak in the number of insurance claims occurred between  2013- 2018. During that time, more than 350 banks lost their  licenses, leading to a period of reconfiguration in understanding   how banks operate. The maximum number of insurance claims was  recorded in 2016 - 88.  In the past five years, the most claims were  in 2021 (22), and in 2023 there were none. However, this year has  already seen five claims, with the most recent one involving the  Moscow Bank of Corporate Finance (BCF), over 90% of the insurance  compensation has already been paid out for this claim.

- If you didn't have time and missed the deadline to receive  insurance:

- The depositor can still apply for an insurance payment before the  end of the bank's liquidation period, which typically lasts at least  a year, making it hard to miss the deadline. Moreover, the DIA  notifies depositors about the insurance event several times through  SMS and mail. However, if the depositor somehow  misses the deadline,  they can request an extension, which the DIA will consider. If the  reason for missing the deadline was valid, such as being in military  service or experiencing serious illness, the depositor will have the  chance to receive insurance after the completion of the bank's  liquidation. The legislation outlines the full list of   reasons. 

- Recently, a significant number of citizens and residents of the  Russian Federation have relocated to Armenia and other third  countries. How is the issue of reimbursement of their bank deposits  resolved in the event of an insured event?

- The main point is that the depositor has a deposit in a bank  registered in Russia. In this case, we protect the deposits of not  only Russian citizens, but also foreigners and stateless persons.  Therefore, the savings of depositors in Russian banks remain insured  regardless of where these depositors actually live.  Since March  2024, we have offered the option to apply for insurance compensation  online. Now, the depositors can submit an application on the DIA  website or on the portal, where various services can be  accessed electronically - from submitting meter readings to applying  for a passport. A person simply fills out an application, enters  their details, and within 10 minutes the money is transferred to the  specified account. To prevent fraud, the depositor only needs to  provide a personal account. An interesting observation: in June there  was an insurance case (Avtogradbank, Naberezhnye Chelny, Tatarstan)  after the bank's license was revoked, 70% of depositors went to the  bank's office to collect their savings. However, three weeks after  the revocation, only 50% of depositors applied to receive funds  online.  I believed in online reimbursement because it is convenient  for everyone and  provides a quick solution. To further simplify the  process, for Mir cardholders we have eliminated the need to fill in   bank and account details for transferring money - it is sufficient to  provide the card number printed on the front. However, statistics  show that many still prefer to visit bank in person to get their  money.

- The expert group on harmonization of legislation in the field of  insurance guaranteeing bank deposits, liquidation, financial  recovery, and bankruptcy of credit institutions within the territory  of the Eurasian Economic Union has been active for several years.  What issues are currently on the agenda of the expert group? What  proposals has the Russian side presented?

- The deposit insurance systems of all EAEU countries are similar,  but have their own unique characteristics. However, the basic concept  remains the same - to protect  depositors' savings and enhance their  confidence in the country's financial system.  As of now, the expert  group has approved 31 conclusions, with five topics approved in 2024.   For instance, we proposed  a guarantee where if you have a deposit of  million in two different banks, in event of insured event, you would  be  paid a million in each bank. However, the issue arises when banks  merge or join? In Russia, there is a guarantee that after a merger,  separate accounting of deposits will be maintained for another three  months, and in the event of an insured event, the depositor will  reveive compensation from both banks. We recommended extending this  practice to other countries within the Union. Our recommendations  will be submitted to financial market regulators for consideration  when forming an interstate agreement.