RS Brief news Neoclassic currencies are increasing in popularity

Neoclassic currencies are increasing in popularity

While the majority of the Russian public have been closely monitoring the rouble’s exchange rate to the US dollar and Euro, the Swiss franc and the British pound have significantly increased in value. The percentage of deposits in Swiss francs and British pounds has increased by an average of 0.5%. While last year the percentage of deposits in the so called neoclassical currencies was less than 1%, today British pounds and Swiss francs account for about 2% of deposits.

The Swiss franc has been strengthening relative to the US dollar over the past 10 years. In this time the value of the Swiss franc has doubled. In 2001, the Swiss franc to USD exchange rate peaked at SFr 1.67 per USD 1 while in the summer of 2011 one could buy 1 US dollar for just 0.8 Swiss franc. The exchange rate of the Swiss franc to the Euro has been oscillating around SFr 1.5 per EUR 1 over the past 10 years but in the summer of 2011 EUR took a plunge to just SFr 1.1 per EUR 1.

Banks offering deposits in these currencies offer the following interest rates:

  • 1.25-2% for deposits in Swiss francs
  • 2.5-4% for deposits in pound sterling.

At the same time opening a deposit in a currency other than Euro or US dollar is no easy task. Most banks don’t offer such deposits at all. While at others, such as VTB24 this option is only available to holders of privileged packages. Many banks offer to arrange payments in these currencies but don’t offer deposits, while others do offer deposits in the neoclassical currencies but not in every region they operate in.

Recently banks and financial institutions have been offering their customers deposits in Chinese Yuan. It was only a short time ago that Russian financial institutions started offering bank transactions in the Chinese currency. Last year this option became available to the customers of Uralsib and B@N Bank. This may Absolut Bank also started offering this option. Earlier Russia’s second largest retail bank VTB24 announced it intended to start offering services in RMB. However, given the fact that this currency is not freely convertible, only deposits of large amounts are accepted in RMB.

A number of experts believe that, by doing this, large financial institutions are trying to preserve their stability as the situation in the global financial markets continues to deteriorate, while others think it’s little more than a marketing move.