Certificate of deposit - a security that certifies the amount of the legal and legal contribution made to the bank by the depositor (holder of the certificate) to receive the deposit (deposit) amount and the interest specified in the certificate at the bank that issued the certificate, or at any branch of that bank, after a specified period. Thus, a bank certificate of deposit is a security that confirms the fact of depositing and storing a certain amount of funds in a banking organization by a legal entity. The period of validity of this document, storage conditions, repayment, interest rate and any other required information are also indicated there.
Note that certificates of deposit are issued only in rubles, income on them is accrued in the form of interest.
Certificate of deposit properties
The properties of certificates of deposit are as follows:
issued only by banks,
governed by banking law,
issued in documentary form,
mean the transfer of rights to other persons,
cannot be a settlement and payment instrument for goods and services,
issued only to residents of the Russian Federation.
Options for issuing certificates of deposit
There are two types of release options. Certificates can be issued both in a single order and in series.
In the first case, an exception is made for one specific client, and he receives a unique security intended only for him, specially issued for such a case.
The second option is intended for a large mass of people or enterprises. These are simple forms, even if fulfilled with all the requirements of the law, into which, if necessary, certain data is entered, after which the certificate of deposit is transferred to the depositor.
Note that bearer certificates of deposit have lower returns than registered certificates.
Mandatory details of the certificate of deposit form
We list the required details of the certificate of deposit form:
Name (cap) "Certificate of Deposit",
Date of deposit
The amount of the issued deposit (deposit amount),
Bank unconditional obligation to return the amount deposited,
Maturity date (date of receipt by the beneficiary of the certificate amount) of the certificate,
Interest rate for using a deposit,
The amount of accrued (due) interest,
Early call rate
Name and address of the issuing bank and (for a registered certificate) beneficiary. Contact details, bank details and correspondent account number with the Bank of Russia,
For a personal certificate: name and contact details of the contributor.
Also in the certificate of deposit should be all the required signatures and stamps.
Note that a certificate of deposit is considered invalid in the absence of any of these details.
If a business transaction is carried out with paper that is not fixed by the parameters and conditions, it shall be considered invalid.
Forms for securities are issued only by specialized printing companies licensed to issue. From this point of view, the document has a high degree of protection, and it is almost impossible to fake it.
What is the danger of "anonymous" sbercertificate
On January 17, 2018, the State Duma finally considered a bill providing for the cancellation of savings books and bearer certificates of deposit in Russia. And if bearer passbooks are still not in use in our country, then a total of half a trillion rubles have been issued of such passport certificates in Russia. An important note: the blue savings books of Sberbank, to which we are so accustomed, the novelty does not apply - they relate to personal.
The bill was introduced by the Government of the Russian Federation in February 2016, but reached consideration only a year later and was adopted in the first reading (out of three).
The explanatory note to the short story says: “From the point of view of anti-corruption legislation, as well as the legalization (laundering) of proceeds from crime, and the financing of terrorism, certificates and bearer passbooks have serious shortcomings, since only the person who was issued can be identified certificate or savings book, and bearer for repayment, but not other persons participating in the turnover. "
Thus, according to the government, when submitting a savings certificate to bearer for payment, a person can act on the instructions or with the consent of the current owner of the savings certificate, which can be extremely difficult to establish the identity of.
Moreover, the following fraudulent scheme is known. The original owner alienates the bearer savings certificate to the bona fide purchaser (for a fee), and subsequently declares its loss and seeks the invalidity of the certificate in court. In this case, the acquirer is deprived of the right to receive funds under this certificate.
The situation here is complicated by the fact that the current provision “On Savings and Deposit Certificates of Credit Organizations”, although it prohibits the use of such instruments as a settlement or means of payment, it is extremely difficult to track compliance with this ban. In particular, as stated in the note to the bill, “it is practically impossible to prove that the holder of the savings certificate, who is an individual, received it as a means of payment, which entails tax evasion by individuals who receive income in the form of contribution certified by such a certificate. ”
The Government of the Russian Federation does not exclude the possibility that, before the occurrence of an insured event for a specific credit institution (revoking a license, establishing a moratorium on satisfying creditors' claims), financially unstable banks “may resort to unauthorized re-registration of uninsured deposits certified by bearer certificates with the insured”. And this, in turn, is a direct way to increase the insurance liability of the Deposit Insurance Agency, and not paid by banks. After all, credit organizations do not pay DIA contributions for sber certificates.
As an additional evidence of the need to abandon non-registered savings books and sbercertificates, the explanatory note contains a study by the Financial Action Task Force on Money Laundering (FATF), entitled “Money Laundering and the Financing of Terrorism in the Securities Sector”. The study notes that bearer securities allow transactions with financial resources without any mechanisms for recording transactions with them and compliance with customer identification requirements.
“At the same time, an analysis of international practice allows us to conclude that savings (deposit) certificates can become an attractive form of allocating public funds and temporarily free resources of companies at the present stage of development of the financial system of Russia, as well as become a source of the formation of a stable part of banks' liabilities. For this, it is necessary to improve the regulatory framework for the regulation of this instrument, ”the explanatory note says.
What will be the certifications
In the case of adoption of the proposed bill and provided that it will not be significantly modified in subsequent readings, at least five important changes await the market for savings certificates.
- Only registered securities issued in documentary form will be recognized as savings (deposit) certificates.
- Sbercertificates will be included in the system of insurance of deposits of individuals (CERs).
- It is planned to envisage the possibility of a bank issuing savings (deposit) certificates with the condition that the depositor renounces the right to receive a deposit upon request.
- A credit institution issuing savings (deposit) certificates will have to keep records of them and transfer rights to them - this way it will be possible to identify not only the primary buyer and the bearer of the certificate for repayment, but also all other persons participating in its turnover in one way or another.
- Savings certificates will be circulated only between individuals (including individual entrepreneurs), and issued only by banks licensed to issue deposits to individuals, certificates of deposit will be circulated only among legal entities, and issued only by banks licensed to issue deposits to legal entities .
At the plenary meeting of the State Duma, the bill was introduced by Deputy Finance Minister Alexei Moiseev. He told the deputies that at the moment in Russia there is not a single valid passbook to bearer. Meanwhile, a certain demand for savings (deposit) bearer certificates is noticeable. Such certificates in the country issued in the amount of about 490 billion rubles. He drew attention to the fact that the bulk of current bearer certificates are Sberbank savings certificates.
According to Moiseev, the tax regulation of savings (deposit) certificates will not differ from ordinary deposits. However, the updated legislation on such certificates will suggest their offer in various currencies (now certificates are nominated only in Russian rubles, issue of certificates in foreign currency is not allowed). Responding to questions from deputies, the deputy minister explained that these instruments would be issued "in the currency in which the bank will offer, but the citizen will want."
In part, what is proposed in the bill on sbercertificates has already been submitted to the State Duma and approved by it for entry into force on June 1, 2018. Duplicate parts are planned to be deleted from the bill under consideration for second reading.
Do you need a new bill
Ksenia Voronina, financial adviser, believes that the main messages of the proposed bill are the withdrawal of money from the shadow turnover, closing loopholes for gray income, maximum transparency of the entire volume of financial transactions at each stage of the movement of money.
“Now, bearer certificates are a convenient tool for transferring money without indicating the purpose of the transfer, and the goals can be completely different: an innocent wedding gift to a friend or receiving revenue without paying tax, paying for illegal goods and services, transferring a bribe. And each of them has different tax and even criminal consequences, ”Voronina points out.
She draws attention to the fact that over the past few years, the trend towards an increase in the degree of transparency of transactions has only gained momentum: serious restrictions were introduced on anonymous electronic wallets (mostly they became nominal), it was even proposed to introduce restrictions on cash turnover.
“This bill is in line with this trend, which should ultimately lead to the fact that for any movement of money not only the sender and the recipient, but also the purpose of payment and the corresponding taxes, fines and, most importantly, the legality of such a goal and possible legal consequences of its absence, ”says the financial adviser.
According to the banker, who wished to remain anonymous, the question of how closely certified bearer certificates are actually involved in the shadow cash flow remains controversial. Moreover, the interlocutor of Banks.ru points out, at one time Sberbank itself, which is largely a market of sber certificates, argued with a similar position of the Ministry of Finance on this financial instrument.
“However, I don’t think that the opinion of even such a giant as Sberbank can affect anything here. In the end, the FATF has been consistently several years already “leading” a line against such instruments as non-personal certificates, - the banker complains. - However, personally, I do not see anything bad in them. Compared to the total volume of retail deposits placed with banks, the share of such certificates is simply scanty and notaboutum too tight regulation, especially the complete "withdrawal" of such an instrument from the banking market. Anyway, this tool allows citizens to earn, and a little more than on deposits. ”
According to Dmitry Amirov, head of the development department of deposit and commission products of Binbank, the bill will not affect the citizens' interest in traditional deposits if adopted.
“As for registered sbercertificates, I also don’t see any prerequisites for the growth of their popularity,” he says. - If they are part of the deposit insurance system and banks make the same deductions on the funds raised with them as on deposits, then there will be no economic justification for establishing higher interest rates on these securities (which was characteristic of bearer certificates). Accordingly, it is still difficult to imagine how this tool will be able to interest investors in the future and what advantages it will have over opening a classic deposit, since the difference between them will be in form, but not in economic content. The only way to give this tool additional meaning was the idea that has been discussed for many years to make sbercertificates irrevocable. That is, to deprive their owners of the right for investors to receive their funds upon request before the expiration of the contractual term for the placement of funds. In this case, banks could really reconsider their attitude to such instruments and set higher interest rates on them, which, in turn, could generate interest in such an instrument on the part of the population. However, as far as one can understand, the irrevocability of registered sbercertificates is not provided for in the adopted bill. ”
Benefits of certificates of deposit
Certificates of deposit have several advantages:
1) A certificate of deposit acts as an excellent tool for investing funds of legal entities. All banks set a minimum amount of a certificate of deposit, which is available not only to large enterprises, but also to small businesses.
Interest rates on such securities are very attractive. In addition, the interest rate is always fixed, and cash is issued to the client at the time of repayment. Cashing out occurs quickly and without special difficulties.
2) The certificate can be transferred or assigned, presented, go bequeathed to another person.
3) Like most securities, a certificate of deposit can be used for settlements or as collateral when obtaining a loan.
Registration of the assignment of the right of claim is confirmed on the back of the certificate. Most often, transactions for the purchase and sale of certificates are made in the same bank where they are issued.
Thus, a certificate of deposit combines the useful properties of securities and term deposits, which include:
High degree of reliability and low risks.
The document has a fixed interest rate. Changing the interest rate by the issuing bank is not possible.
Free circulation. You can sell, bequeath, give. You can leave a deposit, for example, when obtaining a loan at a bank. Keep in mind that this often contributes to lower interest rates. Funds on a bank deposit, for example, are not pledged.
It can be presented for repayment at any branch of the issuer.
Disadvantages of certificates of deposit
The disadvantages of acquiring a certificate of deposit are as follows:
The capitalization (accession) of interest is not provided, since the rate is fixed.
Such documents are not included in the deposit insurance system.
If the certificate of deposit is issued to bearer, then its safety will have to be carefully monitored as well as cash. It should not fall into the hands of third parties.
The paper does not provide for partial replenishment or withdrawal of funds, therefore, it can hardly be perceived as an instrument of accumulation.
Interest accrued on a certificate is taxable in the same way as a classic deposit. Tax, usually around 35%, is withheld by the bank from the certificate holder.
The initial cost of the certificate is taxed (13%) when changing ownership. If the personal certificate was transferred to another person as a result of donation or by inheritance, then this person will have to pay personal income tax because he is the heir to the depositor.
Repayment of certificates of deposit
The main difference between these securities from the usual bank deposit agreement is the ability to transfer the document itself to another person, who gets the opportunity to withdraw the funds indicated in the paper, regardless of who they actually belong to.
Thus, the procedure for redeeming these certificates is not particularly difficult. Нужно просто предъявить депозитный сертификат банку и потребовать возврат указанных в сертификате денежных средств.
Депозитный сертификат – это хороший способ временного размещения финансовых средств организации. Firstly, the funds are protected from inflation, secondly, the company can receive additional income, and if necessary, sell a certificate on the securities market.
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Liquidity for the bank and interest for the depositor?
Banks need to manage liquidity, this is the first reason. In Russia, any existing deposit account, in fact, is a demand account, and the bank is completely unclear at what point the client wants to withdraw his money. Considering that the bank directs the borrowed funds to lending to other customers, that the interest rate can change, and the bank has already issued loans for a certain period at a certain fixed rate, the bank has at least interest risk.
All over the world, interest rate risks are regulated by interest rate derivatives, however, in Russian practice they are absent.
The situation for the bank may become aggravated when, in anticipation of the crisis or when panic occurs “out of the blue”, an infection effect arises - depositors who do not understand the financial situation of a particular bank withdraw deposits in droves, as was the case in the summer of 2004. Moreover, then confidence in the banking system was restored only after the statement of the Bank of Russia on the guarantee of 100,000 rubles and the forced formation of a deposit insurance system
The second reason for the formation of irrevocable deposits is usually called the convenience for investors. If the depositor knows for sure that he will not need money for a certain period of time, then he will be able to deposit funds on a long “irrevocable” deposit and get a higher interest rate than on a regular term deposit. The bank, supporters of the idea explain, can set a higher return on “irrevocable” deposits, since it will carry less risks.
It is unlikely that we will see an increased percentage on “irrevocable” deposits, most likely banks will simply lower interest on ordinary fixed-term deposits, and customers will not gain anything.
But banks will not benefit either, because these innovations will not protect against a systemic crisis - nothing will protect against a systemic crisis, even the deposit insurance system is not designed for such protection. She also will not protect against force majeure circumstances of the client. On the contrary, if the client is in trouble, you should give him money and trumpet everywhere, what a good bank. Then what does the “irrevocable” deposit protect against? From percentage competition with colleagues? Isn’t such an obvious defense achieved in too high a price - in fact, damage to the reputation?
Checking, Saving and CD
The account holder manages the balance of funds on both accounts. You need more money for purchases - transferring them from Saving to Checking.
In addition to these accounts, the client may have a credit card account connected to current accounts or not connected.
The existence of such accounts is very convenient for customers, which increases the relatively cheap resource base for the bank. If the client wants to receive a higher interest rate on his deposit, he will resort to the CD service or certificate of deposit.
Risk free income
Certificate income can be paid monthly, quarterly or at the end of the period - depending on the terms of the contract. If a client wishes to redeem a certificate ahead of schedule, then in this case he does not receive a predetermined income, although the bank cannot use client money at all for free.
What is attractive for such a certificate for the investor? The client receives a slightly higher yield than he would receive by buying government securities (T-Bills), since in this case the client faces a risk of bank default. At the same time, certificates of deposit of up to 100 thousand US dollars fall under the American deposit insurance system, so the risk is minimal. With certificates of more than 100 thousand dollars, which are called Jumbo, an even higher income is paid, but the amount above the insurance limit is not insured.
When pricing certificates of deposit, there are simple rules:
- the larger the amount, the higher the percentage paid,
- the longer the term, the greater the percentage,
- the smaller the bank, the higher the interest rate.
Interest on certificates of individuals is higher than on certificates of legal entities.
These conditions, as applied to the three existing types of certificates of deposit, allow participants in the savings market to flexibly manage the interest risks of the bank and the depositor.
Certificates are ordinary, as described above, with option to buy (Collable CDs) and brokerage (Brokered CDs).
Bank buy-back certificates are used to manage the bank’s interest rate risk. Suppose a bank has sold a certificate with a high rate, and then market rates have gone down, and paying such a high income to the bank is completely unprofitable. In this situation, the bank has the right to redeem the Collable certificate from the client in a predetermined period. It turns out that the bank decides for itself what is more profitable for it - to pay according to the certificate or redeem it. However, in order to keep the attractiveness of this type of deposits for customers, banks pay higher interest rates and some premium at the time of repurchase on certificates with the right to buy.
Brokerage certificates are not individual certificates acquired by a particular person, but certificates belonging to a group of persons and managed on their behalf by a broker. In this case, each owner can own a part of the certificate, and if it turns out to be less than $ 100 thousand, the client’s investment will be fully insured. Brokerage certificate allows you to manage the risks of the depositor in the sense that when the early repayment of its share of the certificate, that is, with early withdrawal of money, the client does not pay a fine. Indeed, the interest rate risk for the bank when withdrawing a small part of the collective deposit is very small, and the deposit broker solves the problem by reselling this share.
In conclusion, it should be said that this system has been formed in the United States for decades. Its distinguishing feature is flexibility, which allows banks to solve the problem of liquidity management by establishing an understandable system of interest rates and account management regimes. At the same time, customers can always choose the form of deposit they need and terminate the contract in time, imagining in advance the impending consequences and not resorting to judicial protection.
Author - Professor, Director of the Banking Institute of the Higher School of Economics
Where to get an unnamed savings certificate, you can still
It should be noted that now the right to issue savings (deposit) certificates has banks that comply with a number of conditions: they have been engaged in banking activities for at least two years, publish annual reports (in particular, the balance sheet and income statement), confirmed by the audit firm, obligatory economic standards, have a reserve fund (balance account 10701) in the amount of at least 15% of the actually paid authorized capital and fulfill the mandatory reserve requirements.
On the market, in principle, there are not so many offers of any kind of savings certificates. Those that exist traditionally "come" from large banks and are precisely bearer certificates that are planned to be banned. However, experts believe that a transition period will be introduced for holders of such certificates who have received this product before the adoption of the law on its cancellation. It will allow you to part with the certificate for a certain time and after the entry into force of the relevant law.
Julia Proshina, Head of Deposits and Deposits Analytics, Banks.ru:
- Name certificates are less convenient for customers, as the rights to use them have to be issued through assignment (assignment of rights). Banks, as a rule, offer to issue only unnamed bearer certificates.
Savings certificate rates usually exceed deposit rates by a few percentage points. For example, in Sberbank, the maximum yield on a savings certificate today reaches 7.1%, and on a deposit - 5.5% per annum. This important aspect affects the choice of an investor in favor of the former. But it is worth considering that sber certificates are similar in terms of a simple savings deposit, that is, they cannot be replenished and partially spent, and interest is paid only at the end of the term. In addition, a bearer savings certificate is a convenient tool for donating a sum of money to a loved one.
In addition to Sberbank, a bearer savings certificate can be issued at a number of other banks. For example, Ak Bars offers certificates for amounts from 1.5 million rubles with a yield of up to 9% per annum. In the Ural Bank for Reconstruction and Development, this security can be issued in the amount of 10 thousand rubles, the maximum rate reaches 7.9%. At BDB Bank, the minimum amount for a savings certificate is 100 thousand rubles, the maximum rate is 8.8%.
Since the savings certificate is not involved in the deposit insurance system, it is quite obvious that, choosing this option for storing funds, depositors go to Sberbank.