Pension savings: regulator’s new requirements
Bank of Russia new requirements to invest pension savings will boost investments by non-governmental pension funds (NPFs) in the real sector of economy including its hi-tech branches. The Bank of Russia Board of Directors has approved a respective regulation and plans to have it registered by the Ministry of Justice of the Russian Federation in a short while.
The Bank of Russia pursues its course for a gradual disinvestment in the banking sector. By 1 January 2017, a maximum share of such assets in the NPF investment portfolio will drop from 40% to 30%. The base to calculate this limitation will be expanded to include deposits and bonds with up to 3-month maturity, as well as settlement accounts.
Funds and asset management companies will be given a free hand to invest pension savings in the shares of Russian joint-stock companies admitted to trading at the MOEX IIM-Prime segment. This segment includes shares of hi-tech companies with market capitalisation of at least ?6 billion. The share of such investment will be limited to 5%.
From 13 July 2017, the Bank of Russia will use for regulatory purposes the ratings of entities included in the register of credit rating agencies (CRA). Considering that many issuers have not been rated by agencies accredited by the Bank of Russia and to avoid making excessive commotion over rating assignment, starting 1 July 2017, pension savings can be invested in bonds included in the top quotation list of the exchange. This temporary measure will stay in force for a few quarters. Upon the expiry of the transitional period, when many issuers get duly ranked, only the ratings of CRAs accredited with the Bank of Russia will be used.
The document envisages a gradual exclusion of mortgage participation certificates (MPCs) from pension savings by 1 July 2019. However, they could be stored in a portfolio until maturity provided MPCs have a real estate rating from a reliable appraiser. Instead of mortgage certificates, NPFs can invest pension savings in real estate by acquiring units of unit investment funds for non-qualified investors. Real estate appraisal should be assigned by a reliable appraiser. To a greater extent, real estate corresponds to the NPF investment profile, while investment funds, unlike MPCs, have more defined and understandable regulation. The share of units and other riskier assets in a fund investment portfolio will be limited to 10%.
Pension savings can be used to conclude derivative and repo transactions provided certain limitations are met. Besides, investment in the assets of groups of related legal entities cannot exceed 15% regardless of such assets’ maturity.