Non-residents will be able to withdraw funds from In-type accounts abroad. What does this mean?

Foreign investors who place capital on the Russian financial market will have the opportunity to send money abroad from special "In" accounts. As specified in the Central Bank, for such investors, as well as for representatives working in their interests, restrictions on the withdrawal of funds held by Russian brokers or trust managers in accounts of this type are lifted. Why the Central Bank took this step and what it could lead to is in the Izvestia article.

What is the "In" type?

• On July 1, Russian President Vladimir Putin approved Decree No. 436 "On additional guarantees of the rights of foreign investors." The document covers non-residents regardless of whether their countries are friendly or unfriendly. To place new investments, such participants will need to open a special account of the "In" category. Through it, non-residents will be able to use deposits in Russian banks, purchase securities at exchange auctions in an unaddressed format and during initial public offerings, and work with derivatives market instruments.

• The Bank of Russia has also defined the procedure for the operation and opening of In-type accounts for banks and professional participants. According to the regulations of the regulator, brokers and managers are required to keep separate records of assets of foreign clients, and banks and depositories are required to exchange information when making transactions on such accounts.

• The Central Bank of Russia has announced that foreign investors who place capital on the Russian financial market under the new rules are given the opportunity to transfer funds outside the country using special-type "In" accounts. This decision is aimed at creating more transparent and understandable working conditions for non-residents, simplifying settlements and capital flows, as well as increasing the attractiveness of the Russian financial market for foreign participants.

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How have the rules of the game changed in the foreign exchange market and what are its prospects?

• In-type accounts were introduced primarily as a tool that allows you to accumulate funds from foreign clients, keep separate records of them and ensure control over transactions. The possibility of transferring funds abroad from such accounts is an element of the mechanism that regulates financial flows, reduces the risks of misuse of capital and at the same time gives investors confidence that they will be able to return invested funds or profits to their jurisdiction if the established requirements are met.

For whom it is especially beneficial

• A new system of rules is currently being formed, providing for the arrival of foreign capital through friendly states. We are talking about those investors who are attracted by Russian financial instruments due to their high profitability compared to global indicators. This interest may be related to various strategies. The possibility of withdrawing funds abroad is created primarily for carrying out carry-trade transactions.

• Carry-on trading is a strategy in which an investor attracts funds in a currency with a low interest rate and places them in assets denominated in a currency with a higher yield. The main purpose of such an operation is to make a profit due to the difference in interest rates between two countries or currencies, which is professionally referred to as a percentage differential.

• The process usually begins with obtaining a loan in a country where the cost of the loan is minimal, for example, in an economy with a long-term low key interest rate. The funds received are converted into another currency in which it is possible to purchase bonds, deposits or other instruments with a higher interest rate.

• As a result, with a stable exchange rate, the investor's income consists of the difference between the interest paid on borrowed funds and the interest received from investments. However, the effectiveness of the strategy depends not only on the percentage differential, but also on exchange rate fluctuations. If the currency in which the funds were invested depreciates relative to the loan currency, profits may decrease or disappear completely. Carry-on trading is often used during periods of stable economic conditions and low volatility, when the risk of sharp currency fluctuations is minimal.

• The Central Bank's easing may have a positive impact on Russia's financial relations with other countries, primarily with the United Arab Emirates. In recent years, the volume of mutually accumulated investments between the Russian Federation and the UAE has increased tenfold. Allowing funds to be transferred abroad from In-type accounts can further increase the volume of mutual investments. However, in general, we should not expect a sharp influx of foreign funds yet.

What can the changes lead to?

• It is expected that the introduction of the possibility of transferring funds abroad from In-type accounts will strengthen the confidence of foreign investors in the Russian financial market, as the availability of an understandable and regulated capital repayment mechanism reduces concerns about the liquidity of investments. Such a measure should also stimulate the inflow of new foreign capital, as investors will consider Russian financial instruments as more predictable and affordable in terms of funds withdrawal.

• An additional effect may be an increase in the volume of transactions with securities. The banking sector and professional market participants, such as brokers and management companies, have received a clear algorithm for interacting with foreign clients and exchanging information, which will streamline accounting and reduce operational risks.

• In the long term, these changes may contribute to the formation of a more stable infrastructure for working with foreign capital. In addition, the innovation will expand the investor base and strengthen Russia's position as a jurisdiction capable of offering transparent conditions for international financial transactions.

When writing the material, Izvestia interviewed:

● Head of the Department of Finance, Accounting and Audit at RUDN University, Doctor of Economics Daria Dinets;

● financial analyst Dmitry Golubovsky.