Foreign currency deposits in banks

Overview of the instrument: contribution in foreign currency

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Валютные вклады в банках, вклады в иностранной валюте

Foreign currency deposits in banks, like any deposits in a credit institution, strictly speaking, do not apply to investment. This kind of transactions deemed to be money market operations, instead of capital market. Nevertheless,, We consider the foreign currencies as an alternative to the purchase of securities or other assets.

Deposits in foreign currency

-%210
Deposits in foreign currency
6.75

Yield

6/10

    Reliability

    8/10

      AGAINST

      • Protection against falling ruble.
      • A guaranteed percentage.
      • Protection of deposit insurance system.

      For

      • The relatively low interest rate.
      • Contribution at the rate is guaranteed only in rubles.
      • Political risks freezing foreign currency deposits.

      Overview of the instrument

      Foreign currency deposits in banks: features

      Unlike the Securities and even with rublevymi deposits, foreign currency deposits in banks is the most secure way to save and grow their money during periods of volatility. The flip side of low risk is relatively low yield.

      Traditionally Russian banks offer significantly higher interest on deposits in foreign currency, than credit institutions of developed countries. However, this is not really a plus a free bonus, but merely reflect the probability of default of the credit organization, the banking sector or the State of the financial system as a whole. Russian foreign exchange deposits in banks are offering risk premium an average of two per cent and above.

      Calculation of income on deposits in foreign currency

      If the customer chooses foreign currency deposits in banks, It turns out to be spared from having to calculate the adjustment for depreciation of ruble. But this is only one side of the coin. In fact, the United States dollar or euro, as well as roubles, inflation. The average rate of inflation in the developed countries, more often than not, does not exceed 3%. However, this relatively small figure for investment results turns out to be an important.

      Suppose, on the contribution of 100 th. client receives United States dollars 5% p.a.. Then the true revenue, Suppose, 5% interest income minus 3% inflation, total 2%. It should be borne in mind, that monetary inflation in different countries can vary. In periods of economic recovery, When consumer demand, goods can become more expensive in developing countries, including Russia, in the currency significantly faster, than, say, in the United States or Europe.

      Contributes to this situation and the introduction of certain administrative barriers, the increase in fees and other measures are not entirely economic nature.

      Contribution in currency — the risk of Bank

      Accounts in Russian banks are guaranteed by the deposit insurance agency. However, foreign exchange deposits in banks are its peculiarity. In the event of bankruptcy of the credit institution, the client will receive the same amount of, before 1,4 million rubles at the beginning of 2015 year, but only in rubles at the official rate.

      Thus, a potential investor should take into account the possibility. Suppose, begins the crisis of the banking system. As a rule, This situation is accompanied by a drop in the national currency. If the Bank is unable to perform its obligations, even if the ACC will take over payments, Investor, in view of the freezing of money for any period, will receive considerably less, than put, when converted into the currency of the.

      When beneficial currency deposits in banks

      On the other hand, in a situation, When are the devaluation, foreign currency deposits in banks currency could become "a haven for investors. At such moments, a real alternative to the deposits in foreign currency, in General, does not exist. Especially if you take into account the, that demand for goods is limited incomes, as a result of, for example, Although real estate and rises in price in rubles, the price for the same objects in the currency can significantly decrease. And buying an apartment or other object – hardly save savings compared to contribution in foreign currency.

      The choice of currency for the contribution

      Most often in Russia open foreign exchange deposits in banks are opened in dollars or euros. However, not excluded the option appearance and other proposals of credit institutions.

      Interest, which is being offered on deposits in foreign currency, You can view our tables: contributions in United States dollars and deposits in euro.

      Calculation of income

      There are two formulas for calculating income in monetary contribution in the Bank: with simple interest and complex, that is when interest is calculated on the interest.

      Simple interest

      In general terms, the formula looks like this:

      ratesimplewhere Sp-sum income, I-annual percentage rate, t is the period in days, K is the number of days in a calendar year, can be either 365, either 366,
      P-the amount, placed in the contribution.

      Compound interest

      Compound interest formula is used then, When income is paid to certain intervals of time, rather than at the end of the period, for example, monthly or quarterly.

      In General, the compound interest formula looks like this:

      ratedif

      where S – amount of income, (P) – bank deposit amount, I is the interest rate per annum, j-periodic term, through which are accrued and capitalized interest in days, K is the number of days in a calendar year, n is the number of periods for the entire duration of the, When the accrual and interest capitalization.

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