New liquidity ratio to limit risks for systemically important credit institutions

Effective from 1 January 2018, the Bank of Russia will be rolling out its structural liquidity ratio (also known as the net stable funding ratio), which is the second of two liquidity ratios outlined in Basel III. The method for calculating this ratio and its 100% minimum value requirement are laid out in the relevant Bank of Russia Regulation.

The legislative innovation, aimed at improving stability in the banking sector, is being implemented as part of efforts to put global approaches for the assessment and regulation of liquidity risk into practice, in line with ‘Basel III: the net stable funding ratio’ (October 2014) published by the Basel Committee on Banking Supervision.

The net stable funding ratio will be calculated and observed on either a consolidated basis - in the case of a banking group where the parent credit institution is systemically important (N28 ratio) - or an individual basis - where the systemically important lender is viewed as a non-group from a regulatory standpoint (N29 ratio).

By meeting the net stable funding ratio, the banking group (a systemically important credit institution) will ensure that it has steady sources of liabilities, which are appropriate for funding the balance-sheet assets and off-balance liabilities of the banking group (credit institution).

Early in the year the Bank of Russia began working with systemically important banks to calculate this ratio on a quarterly basis. The initiative is intended to help banks make appropriate preparations, well ahead of time, for the rollout of new requirements.