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. Last Updated: 07/27/2016

Fledgling Deposit Insurance Plan Takes Off















WHAT'S NOT COVERED
1) Funds placed in bank accounts of entrepreneurs not registered as legal entities, if such accounts are used for business activities. Private deposits by entrepreneurs are insured.
2) Funds placed by individuals in bearer's bank deposits, including those certified by a bearer's savings certificate and/or savings book.
3) Funds placed by individuals in trust with banks.
4) Deposits with branches of Russian banks operating outside Russian territory.

Source: Deposit Insurance Agency


Given the large number of private depositors who have lost their savings in Russian bank crashes, it's not surprising that many people have preferred to keep their savings hidden under a mattress at home.

The recently introduced deposit insurance scheme is meant to improve confidence in the country's banking system. But does that really mean it's now safe to put all your savings into a Russian bank account?

The answer is, it depends.

Mandatory insurance of personal bank deposits has been introduced in accordance with the federal law on deposit insurance adopted in 2003 and serves to protect individuals' savings in Russian banks. Now, only banks that the Central Bank has approved for inclusion in the deposit insurance system have the right to operate with personal deposits, all of which -- in rubles or foreign currency --are insured. Banks began entering the scheme in September 2004.

If the Central Bank revokes the licenses of those banks or introduces a moratorium on the settlement of creditors' claims, private depositors -- regardless of their citizenship -- are entitled to receive insurance payments from the Central Bank's specially created Deposit Insurance Agency.

"To insure a deposit you don't have to sign any additional agreements or pay insurance premiums," said Alexander Zagryadsky, a spokesman for the agency. "The moment you open an account with a bank it is automatically insured in accordance with the law."

Under the law, the agency is to reimburse the full value of each account -- but only up to a limit of 100,000 rubles ($3,500). This ceiling is the same for a client who has several accounts in one bank -- which means that to fully insure larger sums, an individual needs accounts in different banks, with no more than 100,000 rubles in any one bank.

To receive an insurance payout, an account holder must submit a request and identity documents to whichever bank the Deposit Insurance Agency has appointed as an agent. The agent bank starts paying out compensation three days after receiving applications from depositors, but not earlier than 14 days after the insurance event. Compensation payments are to be made until the bankruptcy proceedings are over, which usually takes up to two years. Once a client agrees to a compensation sum in rubles, the money is to be paid within three days.

If the sum deposited in an account exceeds the 100,000 ruble insurance coverage limit, the account holder still has a chance of receiving the rest of the money as part of the bank's liquidation or bankruptcy procedures.

But whether depositors will actually be able to get all of their money back depends on several factors, the first of which is the financial condition of the bank at the time of bankruptcy or liquidation, Zagryadsky said.

"It's not a rare case that due to the unfair actions by a bank's management, the bank at this point is left 'drawn' and there is not enough money to pay the creditors," he said.

Zagryadsky said he recommended that savings be split into several accounts, none exceeding 100,000 rubles, placed at different banks.

According to the Deposit Insurance Agency's web site,www.asv.org.ru, in the first half of 2005, 98 percent of the accounts opened at the banks participating in the deposit insurance system had less than 100,000 rubles.

Currently, the system includes 924 of the 1,100 banks that applied to participate in it in 2004, Zagryadsky said.

He added that according to recent amendments to the law on deposit insurance, banks that have been refused membership may appeal to the Central Bank's Banking Regulation and Supervision Department and then to the Central Bank chairman. Zagryadsky said the agency expected decisions on all appeals to be made by next January. If both appeals are turned down, a bank may reapply to be included in the system two years later, he added.

Private deposits held in banks in Russia reached 2.36 trillion rubles ($83 billion) in the first half of 2005, up from 2.02 trillion rubles in 2004, suggesting that depositors' confidence in the banking system has been grown.

Kim Iskyan, head of research at MDM Bank, said it was now safer to deposit savings in Russian banks than it used to be.

"The banking system is better regulated and more stable," he said.

"There is a vast range of quality of Russian banks, and the considerable majority of them are a lot safer than, say, keeping your cash under a mattress. But there are still some dodgy institutions out there, and it will take time for the sector overall to win the confidence of depositors on a truly broad scale."Given the large number of private depositors who have lost their savings in Russian bank crashes, it's not surprising that many people have preferred to keep their savings hidden under a mattress at home.

The recently introduced deposit insurance scheme is meant to improve confidence in the country's banking system. But does that really mean it's now safe to put all your savings into a Russian bank account?

The answer is, it depends.

Mandatory insurance of personal bank deposits has been introduced in accordance with the federal law on deposit insurance adopted in 2003 and serves to protect individuals' savings in Russian banks. Now, only banks that the Central Bank has approved for inclusion in the deposit insurance system have the right to operate with personal deposits, all of which -- in rubles or foreign currency --are insured. Banks began entering the scheme in September 2004.

If the Central Bank revokes the licenses of those banks or introduces a moratorium on the settlement of creditors' claims, private depositors -- regardless of their citizenship -- are entitled to receive insurance payments from the Central Bank's specially created Deposit Insurance Agency.

"To insure a deposit you don't have to sign any additional agreements or pay insurance premiums," said Alexander Zagryadsky, a spokesman for the agency. "The moment you open an account with a bank it is automatically insured in accordance with the law."

Under the law, the agency is to reimburse the full value of each account -- but only up to a limit of 100,000 rubles ($3,500). This ceiling is the same for a client who has several accounts in one bank -- which means that to fully insure larger sums, an individual needs accounts in different banks, with no more than 100,000 rubles in any one bank.

To receive an insurance payout, an account holder must submit a request and identity documents to whichever bank the Deposit Insurance Agency has appointed as an agent. The agent bank starts paying out compensation three days after receiving applications from depositors, but not earlier than 14 days after the insurance event. Compensation payments are to be made until the bankruptcy proceedings are over, which usually takes up to two years. Once a client agrees to a compensation sum in rubles, the money is to be paid within three days.

If the sum deposited in an account exceeds the 100,000 ruble insurance coverage limit, the account holder still has a chance of receiving the rest of the money as part of the bank's liquidation or bankruptcy procedures.

But whether depositors will actually be able to get all of their money back depends on several factors, the first of which is the financial condition of the bank at the time of bankruptcy or liquidation, Zagryadsky said.

"It's not a rare case that due to the unfair actions by a bank's management, the bank at this point is left 'drawn' and there is not enough money to pay the creditors," he said.

Zagryadsky said he recommended that savings be split into several accounts, none exceeding 100,000 rubles, placed at different banks.

According to the Deposit Insurance Agency's web site,www.asv.org.ru, in the first half of 2005, 98 percent of the accounts opened at the banks participating in the deposit insurance system had less than 100,000 rubles.

Currently, the system includes 924 of the 1,100 banks that applied to participate in it in 2004, Zagryadsky said.

He added that according to recent amendments to the law on deposit insurance, banks that have been refused membership may appeal to the Central Bank's Banking Regulation and Supervision Department and then to the Central Bank chairman. Zagryadsky said the agency expected decisions on all appeals to be made by next January. If both appeals are turned down, a bank may reapply to be included in the system two years later, he added.

Private deposits held in banks in Russia reached 2.36 trillion rubles ($83 billion) in the first half of 2005, up from 2.02 trillion rubles in 2004, suggesting that depositors' confidence in the banking system has been grown.

Kim Iskyan, head of research at MDM Bank, said it was now safer to deposit savings in Russian banks than it used to be.

"The banking system is better regulated and more stable," he said.

"There is a vast range of quality of Russian banks, and the considerable majority of them are a lot safer than, say, keeping your cash under a mattress. But there are still some dodgy institutions out there, and it will take time for the sector overall to win the confidence of depositors on a truly broad scale."