There are several reasons for the dramatic slump in the share of foreign currency deposits among other retail accounts in Russia, the plummeting client confidence in this instrument being the most important one, Alexei Gribkov, Deputy CEO at the Sravni (Compare) financial marketplace explained to Invest Foresight.
The year 2022 saw several significant legislative interventions in this market. The regulator essentially divided foreign currency in banks into deposits that the holder could cash in foreign currency (not exceeding $10K), deposits that could be cashed in rubles at the Central Bank’s exchange rate, and accounts where funds could only be withdrawn in rubles at the bank’s current exchange rate.
“These changes have made the instrument less transparent for clients, eventually reducing their confidence in it,” the expert explained.
The second important factor is profitability, Alexei Gribkov continues. The interest rates banks offer on foreign currency deposits are not as attractive as they used to be. In addition, news of more fees to be paid for depositing foreign currency have become more frequent.
“Also, we cannot dismiss the very limited possibilities for international bank transfers after almost all large retail banks have been disconnected from SWIFT. All these factors taken together have influenced the decline in Russians’ foreign currency deposits,” the expert summarizes.