Investor base potential of the Russian market of bank bonds

Capacity of bank bonds as a source of long-term bank resources isdetermined by the availability, preferences, and potential of investors. Formation of the Russian market of bank bonds is closely connectedwith the development of its investor base, changes in investment behaviour of private investors, as well as policies of major institutionalstructures, primarily, insurance companies and pension funds. There are no official data about the Russian market of bankbonds. In the context of this article, we have identified two groups of investors: private investors and institutional investors. Currently,main investors in at the Russian bond market are commercial banks. It is obvious that at the present stage Russian commercial bankscould be viewed as short-term investors rather than long-term ones. However, the market of bank bonds needs long-term borrowers -insurance companies, investment and pension funds with more stable resources that want lucrative and safe location of these funds. Internationalpractice shows that non-bank financial institutions are the main suppliers of resources for the bond market. These structuresback in the early 1990s provided almost three-quarters of turnover of securities markets worldwide. But in Russia, non-banking financialcompanies are far behind commercial banks in terms of assets and at present they are not able to act as a key source of resources, notonly for the banking sector, but also for the financial market as a whole. Investigation of the investor base of the Russian market of bankbonds suggests a significant investment potential of Russian private and institutional investors (insurance companies and pension funds).The possible benchmark for evaluation of the potential of demand and of Russian non-bank financial institutions on bank bonds may betheir investment in the banking system in the form of other funds, deposits and cash. Investment potential of Russian private investors issignificant and is estimated to $5 trillion. However, most Russians are not ready to assume the high risks associated with investing in thestock market. To attract private investors to the market of bank bonds it is necessary to carry out purposeful work to stimulate the investmentactivity of the population. This article makes proposals regarding the activities of a commercial bank to attract private investorsto the market of bank bonds.

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