The Bank of Russia specifies the rules of investment of pension reserves

The Bank of Russia plans to specify the requirements for the investment of pension reserves, which will operate from 1 January 2021. This should limit the risks of investments and to increase the protection of investors and participants of non-state pension funds (NPF) and to allow NPF to adapt to new regulatory requirements, given the impact of the pandemic.

So, the draft amendments to the corresponding instruction imposes additional requirements to investments in bonds without a maturity date. For such bonds to be used the issue rating or the guarantor and not the Issuer, as depending on the terms of issue of investment risk in the “eternal” bonds may be higher than in the classical bonds of the same Issuer. In addition, investments in perpetual bonds will be taken into account when calculating the limit of investing in shares of this Issuer.

In addition, it is proposed to limit the list of foreign indices on the basis of which they can invest pension reserves in foreign stocks.

Also to maintain the availability of mortgage lending from 1 January 2021 a separate 5% limit on investment of pension reserves in mortgage bonds with high credit rating. These papers will be excluded from the 10% limit on investment in assets with an extra layer of risk, and the limit gradually — by 1 January 2025 — reduced to 7%.

In addition, the project defers for one year the entry into force of certain provisions of the new regulation to reduce the impact of a pandemic and avoid sale of assets at reduced prices. The reduction of the concentration limits is deferred until 1 July 2021. And distribution of limit on assets an additional level of risk purchased prior to the introduction of new rules, was postponed until January 1, 2024.

Project proposal instructions will be accepted from 17 to 30 June 2020.

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