UBRD: Deposit Insurance Law Helps Compete with Large State-Run Banks

29 September 2017 (14:56)

UrBC, Yekaterinburg, September 29, 2017. The new legislation on having SMEs’ bank deposits insured allows private banks to compete with large, state-run lending institutions, says the Ural Bank for Reconstruction & Development’s Corporate Sales Director Olga Drovovozova.

The State Duma went through the first reading of a new bill that gets bank deposits of small and micro-enterprises insured (the insured amount comes to RUR 1.4m). The system is expected to get adopted in 2018.

‘Market instability that has to do with banks getting their licenses annulled all the time results in most customers switching to state-run banks. The current trend is for legal entities to place only moderate amounts with private banks — and for a short time. As for the UBRD, the share of small and micro-enterprises that keep under RUR 1.4m with us currently comes to 48%. This means the new legislation would probably instill more trust in the banking system and would result in customers placing more money with private banks. Another advantage lies in the fact that private banks will be able to compete with government-owned ones, improve their market position, and expand their customer base,’ Drovovozova said.

Drovovozova pointed out that the new initiative will actually result in extra expenses for the banks, as they will have to pay more fees to the Deposit Insurance Agency. This means the banks will be forced to lower the interest rates they are offering on deposits at the moment.

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