Laws and regulations relating to the required reserves deposited with the Bank of Russia

• Laws and regulations relating to the required reserves deposited with the Bank of Russia
• List of Bank of Russia rules and regulations establishing the procedure for depositing credit institutions’ required reserves with the Bank of Russia
• Required Reserves (Reserve Requirements) set by the Bank of Russia

Depositing the required reserves with the Bank of Russia

• Who deposits the required reserves?
• The required reserve depositing procedure

Main Components of the Calculation of the Required Reserves Deposited with the Bank of Russia

Required reserve regulation

• Required reserve regulation deadlines
• The procedure for compiling and presenting the calculation of the required reserves deposited with the Bank of Russia
  • Calculation procedure
  • Calculation presentation procedure

Amount of the required reserves of the credit institutions deposited with the Bank of Russia 

The required reserves of the credit institutions deposited on separate accounts with the Bank of Russia (grouped by registered authorized capital)

The required reserve averaging framework

•  Who has the right to average the required reserves?
•  The required reserve averaging procedure
•  Statistical data on the averaging of the required reserves by credit institutions
  • Number of credit institutions exercising the right to average the required reserves
  • Amount of the required reserves maintained by credit institutions in correspondent accounts (subaccounts) with the Bank of Russia (averaged amount of the required reserves)
  • Credit institutions exercising the right to average the required reserves grouped by registered authorised capital
  • Averaged amount of the required reserves of credit institutions exercising the right to average the required reserves (credit institutions grouped by registered authorised capital)

Stipulated cases of reduction in required reserve accounts (required reserve utilisation)

Sanctions used by the Bank of Russia against credit institutions violating reserve requirements

Sources of information on reserve requirements

 Laws and regulations relating to the required reserves deposited with the Bank of Russia

    Article 35 of the Federal Law on the Central Bank of the Russian Federation (Bank of Russia) stipulates that the required reserves deposited with the Bank of Russia (reserve requirements) are an instrument of the Bank of Russia monetary policy.

    Under Article 38 of this Law, the amount of the required reserves as a percentage of a credit institution’s liabilities (the required reserve ratio) and the procedure for depositing the required reserves are established by the Bank of Russia Board of Directors.

    Article 25 of the Federal Law on Banks and Banking Activities requires a credit institution to comply with the required reserve ratio in respect to the term, value and kind of the funds raised.

    Credit institutions deposit the required reserves with the Bank of Russia in compliance with Bank of Russia Regulation No. 342-P, dated August 7, 2009, "On the Required Reserves of Credit Institutions".

    The required reserves deposited by a credit institution are accounted for in compliance with Bank of Russia Operating Ordinance No. 113-T, dated August 11, 2010, "About accounting by credit institutions the deposit of Required Reserved with the Bank of Russia".

    List of Bank of Russia rules and regulations establishing the procedure for depositing credit institutions’ required reserves with the Bank of Russia

    Required Reserves (Reserve Requirements) set by the Bank of Russia

    The required reserves are deposited with the Bank of Russia by all credit institutions. A credit institution must comply with the reserve requirements as soon as it receives the Bank of Russia licence to conduct banking operations. No interest is paid on the required reserves deposited by credit institutions with the Bank of Russia.

    Collecting do not address to the required reserves deposited by credit institutions with the Bank of Russia.

    The required reserve depositing procedure

    The required reserves are deposited in the national currency on a non-cash basis by transferring funds to the required reserve accounts opened with the Bank of Russia and, simultaneously, to the correspondent accounts (subaccounts) of credit institutions with the Bank of Russia when a credit institution uses the required reserve averaging procedure.

    The required reserve accounts are opened depending on the currency of the liabilities provisioned for (balance sheet accounts No. 30202 "Credit Institutions’ Required Reserves Deposited with the Bank of Russia for the Ruble-Denominated Accounts" and No. 30204 "Credit Institutions’ Required Reserves Deposited with the Bank of Russia for the Foreign Currency-Denominated Accounts").

    The reserving liabilities are the liabilities of a credit institution, denominated in the national and foreign currency, whose structure is established in Section 2 of Bank of Russia Regulation No. 342-P, dated August 7, 2009.

    The liabilities of the credit institution grouped in following categories:

    - "the liabilities of the credit institutions to non-resident corporate entities" – including liabilities of the credit institutions to non-resident corporate entities, to the non-resident banks, non-resident sole trader (entrepreneurs) in the national currency and/or foreign currency that arose in accordance with the banking (correspondent) account agreements and fund-raising agreements (loan, deposit and other),

    - "the liabilities of the credit institutions to the private individuals" – including liabilities of the credit institutions to the resident and non-resident private individuals in the national currency and/or foreign currency, that arose in accordance with the banking deposit agreements (opened savings certificates), banking account agreements.

    - "other liabilities" of credit institution in the national currency and/or foreign currency.

    Do not include into reserving base following liabilities:

    - the money resources, received from the corporate entities (resident, non-resident) with maturity period of three years and more;

    - bonds issued by credit institutions with a maturity period of three years and more;

    - non-pecuniary liabilities (precious metals, gemstones or securities loan);

    - liabilities to other credit institutions registered in accordance with the established procedure and conducting operations under licence issued by the Bank of Russia, liabilities to the international financial organizations, which are provide their activities under the international agreements of creation with Russian Federation participation, to Vneshekonombank and to the Bank of Russia (except liabilities under dept securities with percents), and liabilities to State corporation "Deposit Insurance Agency" and/or liabilities to investors (non-credit institutions), which are arise through the rendering financial help under the plans of State corporation "Deposit Insurance Agency" to prevent a bankruptcy under Federal Low of The Russian Federation dated October 27, 2008 ¹ 175-FZ "On additional measures to Strengthen the Stability of the Banking System through December 31, 2011"

    - debts between various divisions of a credit institution.

    The sum of liabilities of the dept securities issued by credit institutions is decreasing on sum of interbank liabilities of the dept securities issued by other credit institutions-residents, which is calculated as:

    - the sum of reserving liabilities (dept securities part),

    - the sum of liabilities of the dept securities issued by credit institutions,

    - adjustment factor is a numerical multiplier established by Board of directors of Bank of Russia (in an interval from 0 up to 1) for definition the sum of interbank liabilities of the dept securities issued by other credit institutions-residents, which are not including into reserving base (the information about adjustment factor public in the "Bulletin of Bank of Russia").

    The amount of the required reserves for liabilities denominated in the national currency is reduced by the amount of ruble funds in the cash department of a credit institution, which, however, should not exceed 25% of the amount of the required reserves for the ruble-denominated liabilities.

    The Bank of Russia regulates the amount of the required reserves on a monthly basis. It may regulate the amount of the required reserves ahead of schedule by the decision of the Bank of Russia Board of Directors.

    Required reserve regulation deadlines

    The procedure for compiling and presenting the calculation of the required reserves deposited with the Bank of Russia

    The amount of the required reserves calculation made with accounting period from 1^st date of accounting month to 1^st date of following month (inclusive).

    Calculation procedure. The calculation comprises:

    1. the calculation (compiled in the form as indicated in Annex 1 to Bank of Russia Regulation No. 342-P, dated August 7, 2009,

    2. documents in the form of Annexes 2-6 to Bank of Russia Regulation No. 342-P, dated August 7, 2009,

    3. the statement on the absence of balances (any form).

    4. the necessary explanations.

    The document in the form described in Annex 3, 6 to Bank of Russia Regulation No. 342-P, dated August 7, 2009, is compiled in the event of the use of the professional judgement by a credit institution. The professional judgment is based on laws and regulations, the accounting policy implemented by the credit institution in compliance with Bank of Russia requirements, the credit institution’s source and other documents characterising the corresponding liabilities, and the accepted business practices.

In a purpose of separate parameters calculation for the documents compiling in a form of Annexes 2, 5, 8 to Bank of Russia Regulation No. 342-P, dated August 7, 2009, a formula of average chronological size is applied (Annex 1 to Bank of Russia Regulation No. 342-P, dated August 7, 2009).

    Calculation presentation procedure

    The calculation is presented to the Bank of Russia regional branch where a credit institution has a correspondent account by the established deadline.

    Calculation and the documents of the credit institution, documents of regional branches of the Bank of Russia are sending to the head division of the Bank of Russia and to the credit institution, accordingly, on paper and/or in the form of electronic messages with authentication code. The documents sending in the form of electronic messages without an authentication code, have to be sent on paper also.

    When making the calculation for its electronic presentation, a credit institution should indicate the balance sheet subaccounts recording the provisioned-for liabilities. The absence of a balance in the balance sheet account is indicated by nil.

    When making the calculation for its presentation on paper, a credit institution may indicate the balance sheet subaccounts established by the credit institution’s chart of accounts, except the accounts that had zero balances during the reporting period.

    The documents whose forms are shown in Annexes 2-4 to Bank of Russia Regulation No. 342-P, dated August 7, 2009, may not be sent in the calculation if they contain zero values in all balance sheet accounts indicated in them (certain personal accounts of balance sheet accounts) during the reporting period. Documents compiling in a form of Annexes 3, 6 to Bank of Russia Regulation No. 342-P, dated August 7, 2009, may not be sent to the regional branches of the Bank of Russia in case the credit institution didn’t use a professional judgment.

    I this cases credit institution send a statement to the regional branch of the Bank of Russia (any form). This statement should contain the requisites allowing unequivocally define the form and number of the Annex (forms and numbers of Annexes) to Bank of Russia Regulation No. 342-P, dated August 7, 2009, in connection with not sent statement.

    During the required reserve regulation period, a credit institution may correct the documents presented as part of the calculation (should an error be detected by the Bank of Russia regional branch or the credit institution). The corrected calculation should be accompanied by pertinent explanations, signed by the credit institution’s authorized representatives or containing the electronic message authentication code.

    In case of updating the calculation and the documents presented as part of the calculation by the credit institution, a Required reserve regulation deadline can’t be prolonged.

    A fact of late sending a calculation by the credit institution is a violation requirements of the Bank of Russia Regulation No. 342-P, dated August 7, 2009, and It’s become the reason of sanctions under article 74 to Federal Low of The Russian Federation dated July 10, 2002 ¹ 86-FZ "On the Central Bank of the Russian Federation (Bank of Russia)".

    The right to use the required reserve averaging framework is granted to credit institution, concerning to the first or the second classification groups under Bank of Russia standard acts (for non-bank credit institutions - Bank of Russia Ordinance No. 766-U, dated March 31, 2000, with amendments; for banks - Bank of Russia Ordinance No. 2005-U, dated June 30, 2008), and meet the following criteria on date of calculation presentates:

    1. have no shortfall in the required reserves or unpaid fines imposed for non-compliance with the reserve requirements;

    2. it had fulfilled its obligation to average the required reserves in the previous averaging period (in case credit institution used a right of reserve averaging framework);

    3. it has no overdue pecuniary obligations to the Bank of Russia, including overdue obligations on loans and interest on them.

    The required reserve averaging procedure

    The averaging of the required reserves signifies that the averaged balance in the correspondent account (correspondent subaccount(s)) opened by a credit institution with the Bank of Russia is accepted as the fulfilment of the reserve requirements.

    To calculate the amount of the required reserves that must be maintained in the correspondent account (correspondent subaccount(s)) of a credit institution with the Bank of Russia, the credit institution uses an averaging ratio that should not exceed the averaging ratio established by the Bank of Russia.

    To be granted the right to do the averaging in the current averaging period, a credit institution should calculate and indicate in the calculation the averaged amount of the required reserves.

    The averaging period means the period from the 10^st date of the month after accounting month to 10^st date of the second month after accounting month inclusive. In case of required reserve extra regulation the averaging period established by Bank of Russia.

    If a credit institution meets the established criteria, the Bank of Russia regional branch grants it the right to do the averaging and establishes the averaged amount of the required reserves for the calculation.

    If a credit institution fails to meet the established criteria, the Bank of Russia regional branch refuses to grant it the right to do the averaging and the averaged amount of the required reserves for the calculation is set at nil.

    The Bank of Russia regional branch notifies a credit institution of its decision in the Regulation report.

    The Bank of Russia gives opportunity to credit institutions to extend credits at fixed rates to enable credit institutions efficiently manage their liquidity when using the required reserve averaging mechanism. It is possible to find out conditions of this credit operations in the following sections "Loans Extended against the Collateral (Blocking) of Securities from the Bank of Russia Lombard List (Intraday, Overnight and Lombard Loans)" and "Loans secured by non-marketable assets or guarantee" of material "Bank of Russia Secured Loans".

    Statistical data on the averaging of the required reserves by credit institutions

Number of credit institutions exercising the right to average the required reserves

Amount of the required reserves maintained by credit institutions in correspondent accounts (subaccounts) with the Bank of Russia (averaged amount of the required reserves)

    A reduction in the required reserve accounts (required reserve utilisation) is possible in the following cases:

    1. as a result of the regulation of the amount of the required reserves (when the amount of a credit institution’s liabilities provisioned for decreases and (or) when the required reserve ratios are reduced and (or) when the Bank of Russia averaging ratio is increased);

    2. when a credit institution is granted the right to average the required reserves (that is, to maintain the averaged amount of the required reserves in the credit institution’s correspondent account (correspondent subaccount(s) opened with the Bank of Russia);

    3. after the revocation of banking licence from a credit institution (the required reserves are transferred to the correspondent account opened with the Bank of Russia and used according to the procedure established by the federal laws and regulations issued in pursuance of these laws).

    Should a credit institution violate the reserve requirements, the Bank of Russia has the power without further authorisation to write down from the credit institution’s correspondent account (correspondent subaccount(s)) with the Bank of Russia the amount underpaid and judicially impose a fine in the amount established by the Bank of Russia. Fines for violation of the reserve requirements paid by credit institutions (recovered by the Bank of Russia in accordance with the established procedure) go to the federal budget revenue.

    Compliance by a credit institution with the reserve requirements is one of the criteria taken into account when accessing the credit institution to the Bank of Russia monetary policy operations (refinancing of (lending to) credit institutions and deposit, repo, reverse repo, currency swap and other Bank of Russia operations).

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