The Bank of Russia in late February, sent to credit institutions letter, which encourages them to get inform new clients about the offered financial products and services. The regulator explains the appearance of the document customer complaints that when contacting the Bank, such as for Deposit, they do not inform properly about the risks when additionally offer these and other financial services and instruments.
To solve this problem, the Bank of Russia proposes that banks use a special form of notification of clients about the services they receive. A variant of this form attached to the letter. In her citizens, in writing, must specify the essential terms of the contract, in particular provider of Agency services, the commissions payable and accept the risks. The form must be used large print, easy to read, the letter says.
Central Bank stresses that the Bank must inform the client whether the proposed funds are insured in accordance with the law “On insurance of individuals ‘deposits in banks”. The respective section is in the form of a notification.
Banks are encouraged to conduct staff training, offer financial services and products, and conduct audio and video recording of such sales.
Such measures, according to the Central Bank “will increase confidence in the financial market, including the banking sector, and to prevent exposures of individuals to which they were not prepared”.
Risks to unsuspecting
Banks, faced with the slowdown in credit and even the reduction of credit portfolios, made a bet on increasing fee income, including through the sale of affiliate products. As noted by chief analyst of Sberbank Mikhail Matovnikov, many lending institutions began to offer customers products with a high income, non-Bank deposits. At the same time, adds the General Director of UK “Sputnik — capital Management” Alexander Losev, many of them did not explain to citizens that the risks of such investments are not insured.
Three top managers of the banks from top-50 in terms of assets agree that the regulator for the publication of recommendations and pushed the story Tatfondbank. As he wrote in January, the newspaper “Kommersant”, 2 thousand depositors of the Tatar Bank, trusting in his staff, all of a sudden turned into clients of its subsidiary investment company “TFB Finance”.
“Transformation” took place with the renewal of deposits: as specified in the publication, clients have come to extend the Deposit, and the Bank’s employees were asked to place money in another account, under a higher rate and while maintaining their insurance coverage. Clients believed, considering that prolong the contribution, but later turning to “TFB-Finance” found that their money had bought bonds of Tatfondbank. The loss of these customers were estimated to total 4 billion rubles.
The interviewed participants of the banking sector fear that the new document will have an additional burden on the operation of banks, as well as complicate the client remote service, whereas banks want to rid clients wishing to open an account or buy this or that product, you need to go to the office.
According to the head of the Department portfolio risk analysis at Alfa-Bank Sergei Turyshev, the appearance of the new document will increase the document workflow and labor costs: employees have to spend time to explain what is this document and how to fill it out. He hoped that in the future the regulator will be allowed to complete the document online.
Another source , the risk Manager of the Bank of the top 10 in terms of assets, doubts that the document will contribute to increased awareness of and more responsible approach to the selection of financial products and services. The reason is the human factor. “People tend to not think about what they sign. Plus they don’t want to waste time. They most likely will believe what they are told the Bank employee that will fill in the document,” he said.
The initiative of the Central Bank is good from the point of view of ideas, but not from the point of view of implementation, agrees the analyst of investment company “Finam” Bogdan Zvarich. In his opinion, to fully insure the customer, the document must be “absolutely deliberate,” until the phrase “I was warned that I might lose all their funds” because people can be aware of the risks as such, but do not recognize their degree.
According to partner, Deputy General Director for work with private clients “Aton” Grigory Sedova, the customer a written notice and will cause a misunderstanding on the part of active investors. “Any horror stories does not increase the influx of investors into the stock market,” he adds.
Matovnikov from Sberbank and managing Director of retail business of Bank “Opening” Alexey Karjakin the initiative of the Central Bank supportive. According to Karchazhkina, the document will contribute to enhancing transparency of the relationship between the Bank and customers. Matovnikov adds that the form of notification may also benefit the banks themselves: in the case of a dispute they will have the opportunity to prove that the client was adequately informed.
What financial products banks sell
In addition to deposits, banks are offering products of investment life insurance (coli) and structured products.
Products coli is a savings insurance policies with the possibility of investment in various financial instruments. Minimum validity period is 3-5 years. The income derived from them, as a rule, is charged at the end of the contract, although there are products with the ability to obtain annual yield. By estimations of the Chairman of the Committee on life insurance VSS, senior managing Director of Sberbank Maxim Chernin, the target rate of return on the investment policies of life insurance exceed the yield of deposits by approximately 3 percentage points
At the end of 2016, some banks from the top-15 by assets reported a sharp increase in demand for investment insurance instruments. Thus, according to Sberbank in December 2016, the volume of products coli in the client’s portfolio grew at an annualized rate of 38% to 93 billion rubles.
Banks VTB and VTB24 announced the increase in the share of insurance policies in the total portfolio of clients approximately two times. But it is important to note that the proportion of such policies is still very low: VTB24 it was 1%.
PSB products savings and investment insurance represent approximately 30% of the total portfolio of wealthy clients. Alfa-Bank instruments coli has 10% of the Bank’s VIP clients.
According to the rating Agency “Expert” in the first half of 2016 coli was the main growth driver for the entire life insurance market, showing the pace of inflow of contributions of 147,5%. The accelerated development of this segment of the market, the Agency has tied up with the end timing of high-yield deposits concluded in early 2015 after a sharp increase in the key rate of the Central Bank.
Structural (structured) product is a complex financial instrument consisting of the underlying asset with fixed income (deposits or discount bonds) and risk (investment) part. At last can log in futures and options on currency purchase of raw materials and precious metals, and stocks and bonds.
In Russia there is no organization, systematizing information related to issuance and handling of structured products. In the European Union, for example, the European structured investment products Association (EUSIP).