Repatriation of balances from accounts in foreign banks by public officials contributed to a record growth of deposits in “VTB 24”, according to the bank’s president, Mikhail Zadornov.
By July individuals’ balances in “VTB 24” reached 982 bn roubles, an increase by 163.6 bn, or 20% since the beginning of the year. This is a more substantial increase than for the whole last year when the deposits grew by 147 bn roubles.
This sharp increase is, of course, an anomaly. It had no economic prerequisites. Household incomes grew more slowly this year, with the deposit portfolio is growing faster than expected, said Zadornov. “Part of the inflow are one-time transfers from abroad. A certain part, of course, is from Cyprus. Also the funds transferred by those state officials, who by law are required to close their accounts by mid-August, so many of them are bringing their money back to Russia,” said Zadornov. He did not specify what proportion of the flow of funds to the individuals’ accounts is attributed to state officials, saying only that those were “significant amounts.” As a result, the proportion of VIP-clients money in the “VTB 24” portfolio of deposits exceeded 28%, while early in the year it stood at 22.5%.
The currency composition of deposits hasn’t changed much: from the beginning of the year the share of foreign currency deposits rose from 35% to 38%, said a “VTB 24″spokesman.
The law prohibiting civil servants, parliamentarians, governors, top managers of state corporations and the Central Bank, as well as members of their families, to own foreign assets, became effective on May 8. Until August 7, they must either transfer their accounts from foreign banks to Russia, or quit their jobs.
According to Zadornov, the public officials money “come back” not only to state-owned banks, and this factor may have an impact “on the whole picture in terms of deposits in the banking system.”
Some impact is there, but not as significant as at VTB. During the first half of the year individuals’ deposits in Russian banks grew by 9.7% to 15.63 trillion roubles. A year ago, growth was more moderate at 8.1%.
The unexpected inflow is also noted by the Deposit Insurance Agency (DIA). “This year March and April were unusual: the flow of funds to individuals’ accounts over these two months was 250-270 bn roubles more than usual for this time of the year,” notes the DIA Deputy Director General Andrei Melnikov.
He believes that such behavior of deposits was determined by the following three factors: Russian citizens’ funds transfers from Cyprus, the requirement for civil servants on transfer their accounts to Russia, and the “Rosneft”/ TNK-BP deal, but he wouldn’t try to assess a relative importance of each of them. “It is clear that the money that could be behind each of these factors were distributed unevenly throughout the banking system and settled down in various banks,” said Melnikov.
It is reported that the bulk of the inflow was in the top ten banks in terms of deposits. For the first half of the year balances on individual accounts in Sberbank rose by 7.2% compared to 6.9% a year earlier, in Gazprombank the increase was 11.4% vs. 8%, in Agricultural Bank by 9.8% and 5.1% respectively, and in Alpha-bank by 14.1% and 12.4% respectively.
Of medium-sized banks a sharp inflow of individuals funds was registered in “Russia,” the main shareholder of which is Yuri Kovalchuk. In the first half of the year the bank’s deposits increased by 2.6 bn roubles, of which 2.1 bn only in April. For all of last year, the bank attracted 2.9 bn roubles in deposits. A bank representative explained this abnormal influx of deposits by a “revision of the menu of term deposits, a modernization of card products, setting up of customer service, and expansion of sales channels, including remote services.”
The Sberbank representative could not comment on the impact of transfer of foreign accounts of public officials and parliamentarians on the deposit dynamics. The representative of the Agricultural Bank told “Vedomosti” that the proportion and the impact of such depositors were “insignificant.”
“We do not see a trend of massive transfer of funds from abroad in connection with the ban for civil servants to have accounts in foreign banks. Such cases are rare and do not fundamentally affect the number of customers and the overall balances,” said Ekaterina Trofimova, the Vice-President of Gazprombank.
Transfer of foreign account balances by civil servants will not have a major impact on the volume of attracted deposits at year-end, thinks DIA. “Our forecast on the growth of deposits has been adjusted upward to the upper limit, that is 20% per year [or 2.8 trillion roubles]. We can see that the situation has leveled off after this jump,” says Melnikov.