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had the average maximum yield of 8.4% interest in 2017, Vedomosti daily compares on May 31. Investment life insurance premiums in 2017 grew by 53.7% to RUB331bn ($5.3bn), with the most of the premium growths in the life insurance segment attributed to the investment product. ILI is a capital-protected product that guarantees the return of the investment, Sberbank Life Insurance analyst Boris Borzunov told the daily. He noted that large insurers have a wide choice of assets to invest the underwritten premiums in, and mixed with more risky assets such as tech companies yields can be pushed up. Nevertheless, other analysts surveyed by Vedomosti believe that deposits still remain much more liquid and solid instrument for private individuals. Also the CBR's reports notes that the risk of misinforming the consumers on the complex long-term investment instrument is very high, as most often the ILI is sold to clients by intermediary banks that are incentivised by commission fees.
Russia's largest banks launched cut interest rates en masse in an offer to refinancing existing consumer loans in what is starting to look like a price war to win new customers, Vedomosti daily reported on May 11 citing representatives of country's biggest lenders. The cheaper rates will help clients to cover outstanding consumer debt with new cheaper loans, but brings in new and cheap sources of financing for the banks as competition heats up. "Refinancing does not require considerable costs, and it seriously simplifies servicing the [consumer] loans," Pavel Simonov of Sberbank told the daily. Refinancing the loans allows cutting the interest rate, bundling up several loans, and cut monthly servicing costs. The service has been revived for the first time since 2014 as interest rates decline and banks start competing for solvent borrowers. Such services have been proposed since 2017 by Alfa Bank, Rosbank, Raiffeisen bank, Uralsib, and others, as well as now bailed-out Promsvyazbank (PSB), Financial Corporation Otkritie, and Vozrozhdenie Bank affiliated with the PSB. Notably, the banks propose to refinance both their own loans and the loans issued by other banks, both of which is now allowed by the Central Bank of Russia. The only bank not restructuring its own loans is state-controlled major VTB, seeing the measure as pertinent solely in the case of worsening credit quality of the borrowers. The service is advantageous to the borrowers and became one of the most popular retail products, as the average interest rates on consumer loans decline by 2-4pp on average across the sector, analysts surveyed by Vedomosti note. Minimum refinancing rates for the banks declined from 14-16% to years ago to 10.5-12% currently.
8.2.2 Bank News
Russian state-owned development bank Vnesheconombank (VEB) reported a record net loss of RUB288bn ($4.5bn) for 2017 , soaring 2.6-fold year-on-year, the bank said on April 27. The loss was attributed to high reserves for bad loans that stood at RUB250bn in 2017 (RUB510bn in 2016). VEB's loss throws a long shadow on the efforts to restructure the development bank under its 2021 recovery strategy. The bank's situation could be worsened by the sanctions, as most recently Fitch Ratings said that VEB is one of Russian banks having material exposure to newly sanctioned companies and could require additional government support . VEB was on the verge of collapse in 2014 when it accumulated huge debts due to financing inefficient government-backed projects. Back then, the government took a decision to bail VEB out, but the lender went through a serious management reshuffle after a new team headed by chairman Sergei Gorkov was appointed. The
52 RUSSIA Country Report June 2018 www.intellinews.com