Deposit insurance system impact on household deposit market

The deposit insurance system plays a major role in enhancing financial stability, promotes radual growth of public confidence in the banking system, and strengthens positive trends emerging in the sphere of household savings in the banking sector.

The following major changes can be traced in the development of the deposit market:

In 2006, and specifically in the second half of the year, the banking system registered a major inflow of household deposits. They grew by 1047 billion rubles in the year (table 4).

The growth was uncharacteristic for the market development trends in previous years and was mostly triggered by rising personal incomes and by higher deposit insurance coverage, which upped from 100 to 190 thousand rubles from August 2006.

These trends caused the Agency to review the household deposit market growth forecast for 2006 from 28-32% to 34-36%. However, the actual growth rate exceeded even this optimistic scenario and comprised 38.2%.

An overwhelming majority of banks (84.9%) reported a growth of household deposits. Deposits in most banks (26.9%) grew at a rather fast pace – in the range of 20% to 50%. It was this group of banks that determined the average deposit growth in the whole system, as it occupied the biggest share of the market (35.9%) (table 5).

The year 2006 reported a considerable growth of deposits exceeding 100 thousand rubles (44%), and 2.3 million new accounts were opened. The average deposit below the 100-thousand benchmark comprised 3.3 thousand rubles; the average deposit in the 100-200-thousand range was 132.6 thousand rubles, in the 200-300-thousand range – 239.3 thousand rubles, and over the 300-thousand hurdle – 1,123.5 thousand rubles.

It is noteworthy that after deposit insurance coverage limit was increased from 100 to 190 thousand rubles, deposits exceeding 200 thousand rubles grew at fastest rate. In the second half of the year they increased 25.4% in numbers and 27.3% in amount.

To assess the current investment behaviour of the population and its changes caused by the deposit insurance system the Agency ordered in November 2006 a new sociological poll by the VtSIOM public opinion research center.The poll revealed that in 2006, Russians became more informed about the deposit insurance system compared to 2005 (45% in 2006 against 35% in 2005).

Table 5. Groups of banks by deposit growth rate in 2006

The poll revealed that in 2006 the Russians became more informed about the deposit insurance system compared to 2005 (45% in 2006 against 35% in 2005).

The poll showed the deposit insurance system began to more actively influence investment behaviour by Russians in 2006. In the year of the report the deposit insurance system affected the actions and intentions of 15% of the population. The influence on bank depositors was even greater and affected the actions and intentions of some 45% of them.

The increase of the deposit insurance coverage limit to 190 thousand rubles in 2006 rendered a positive impact on the investment conduct of 6% of Russians, two thirds of whom already had bank deposits at the time of the change, while the remaining third opened bank accounts due to the increased coverage limit.