Russian govt decides to raise deposit insurance to 1 mln rubles - paper
MOSCOW. Oct 4 (Interfax) - A decision was made at Prime Minister Dmitry Medvedev's meeting with Russian bankers on Wednesday to raise retail deposit insurance to 1 million rubles from the current 700,000 rubles, Kommersant reported on Thursday, citing sources.
Representatives of the country's largest banks, who oppose the increase, managed to work out a kind of compromise with the authorities, the paper said. The insurance threshold will be raised, but on certain conditions that are intended to partially offset risks. One such condition proposed by the bankers would be to have the higher insurance coverage apply only to the principal of the deposit, not the interest. Another proposal was to provide partial coverage for the full amount of the deposit with interest, but only part of one and the other, for example 90%, so that the depositor is risking not only interest, but part of the principle as well.
Medvedev instructed the relevant agencies - the Deposit Insurance Agency, Central Bank and Finance Ministry, to work out this issue and decide what portion of the deposit will be covered, the paper said. Proposals on the compensation mechanism are supposed to be worked out by October 15, the paper said.
The reports of the plans to increase deposit insurance were confirmed by the prime minister's press service. Instructions will soon be issued to work out the specific conditions of the increase and submit them to the government, Medvedev's spokesperson Natalya Timakova said.
Wednesday's meeting also discussed issues concerning bank liquidity, increasing bank responsibility in consumer lending and giving the Central Bank additional powers, including the right to make reasoned judgments, a power that all G20 central banks have.
The paper also said that at the meeting bankers received a bonus in the form of a promise to resolve the issue of allowing banks to unilaterally close client accounts. Major banks have been seeking this right for years, but the issue has remained unresolved.
The decision to increase deposit insurance to amounts of up to 1 million rubles could be made several months after discussion of the proposal, Central Bank first deputy chairman Alexei Simanovsky said.
"This issue is being discussed. In my view, a decision after discussion is a matter of months," Simanovsky told reporters on Thursday, adding that he did not want to get ahead of evens and that this issue is being discussed now.
Also under discussion is the issue of how to protect the deposit insurance system from elements of price competition that lead to heightened risks at some members of the deposit insurance system.
One of the options for protecting the system is to differentiate contributions to the deposit insurance fund, Simanovsky said.
In addition, the authorities might consider a "certain deductible" for deposits that are not placed on market conditions - where the interest rate is far higher than the average market rate, Simanovsky said.