The deposit rates of the largest banks fell to a historic minimum: how does this affect the economy, and where does the exchange

Journalists of the Vedomosti publication drew attention to the fact that the largest Russian banks reduced deposit rates to historic lows. The average rate that banks from the top 10 offer to customers has fallen to 5.039%. This is the lowest figure since the start of calculations in 2009.

What happened

The average maximum deposit rate of the ten largest Russian banks decreased to 5.039%. At the same time, in the second decade of May this indicator was 5.399%.

The previous minimum of the rate was fixed in March – then the indicator fell to the level of 5.15%. Dynamics of the average maximum bid published on the website of the Central Bank.

How reduced deposits stimulate interest in the exchange

Decreasing rates on deposits stimulate the population to search for other tools for saving and increasing funds. So according to last year’s research, the number of private investors in the Russian stock market exceeded 3.5 million people.

Since the beginning of 2019, 1.6 million investors have opened brokerage accounts for trading on the Moscow Exchange. A significant number of new participants in the Russian stock market are small investors with deposit amounts not exceeding 50-100 thousand rubles.

Such newcomers begin their activities on the stock exchange with small amounts, do not increase their deposits for a long time and prefer a long-term investment strategy (buy & hold).

Why do investors come to the exchange

In recent years, there have been options for low-risk exchange investments that allow you to earn more than the deposit rate at the bank:

IIS accounts (they can be used for strategies with investments in government and corporate bonds);
Structural Products – These are different financial instruments collected in a single portfolio. Analysts of a brokerage company select them in a certain proportion to ensure either minimal or near-zero risk when investing on a stock exchange;
Model Portfolios – it is an investment instrument that consists of several securities selected on certain grounds (for example, bonds or shares of one sector of the economy)
ETF – in fact, these are exchange-traded investment funds, which are a portfolio of shares or other assets that completely repeat the composition of the target index.

To use these tools you only need to open a brokerage account – today you can do it online.