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Mandatory Reserve Requirements

Laws and regulations on mandatory reserve requirements

Required reserve depositing with the Bank of Russia (general provisions)

Reservable liabilities

Procedure for regulating the amount of required reserves

Procedure for depositing required reserves through required reserve averaging by credit institutions

Designated reductions in required reserve accounts (required reserve utilisation)

Bank of Russia sanctions against credit institutions violating mandatory reserve requirements

Sources of information on required reserves


Laws and regulations on mandatory reserve requirements

In compliance with Article 35 of the Federal Law 'On the Central Bank of the Russian Federation (Bank of Russia)', mandatory reserve requirements are a key instrument of the Bank of Russia's monetary policy.

In compliance with Article 38 of the Federal Law 'On the Central Bank of the Russian Federation (Bank of Russia)', the Board of Directors establishes the amount of mandatory reserve requirements (required reserve ratio, required reserve averaging ratio) and the procedure for meeting mandatory reserve requirements by credit institutions, including the procedure for depositing required reserves with the Bank of Russia.

In compliance with Article 25 of the Federal Law 'On Banks and Banking Activities', the credit institution has to comply with mandatory reserve requirements.

Required reserves are deposited with the Bank of Russia in compliance with Bank of Russia Regulation No. 507-P, dated 1 December 2015, 'On Credit Institutions' Required Ratios'.

The list of balance sheet accounts whose balances are included in reservable liabilities is determined in compliance with Bank of Russia Regulation No. 385-P, dated 16 July 2012, ‘On Accounting Rules in Credit Institutions Located in the Russian Federation’.

Required reserves deposited by the credit institution are recorded in accounting in compliance with Bank of Russia Letter No. 113-T, dated 11 August 2010, 'On Accounting Required Reserves Deposited with the Bank of Russia by the Credit Institution'.

Information on required reserve ratios and required reserve averaging ratio is published in the Bank of Russia Bulletin and on the Bank of Russia website.

 List of Bank of Russia regulatory acts determining the procedure for meeting mandatory reserve requirements by credit institutions

 Mandatory reserve requirements (required reserve ratio, required reserve averaging ratio)

Required reserve depositing with the Bank of Russia (general provisions)

All credit institutions shall comply with mandatory reserve requirements. The credit institution has to comply with reserve requirements as soon as it obtains a banking licence and until its banking licence is revoked.

The credit institution deposits required reserves with the Bank of Russia in cash in the currency of the Russian Federation as follows:

by transfer to the separate required reserve account (accounts) with the Bank of Russia for liabilities in the currency of the Russian Federation and in the foreign currency;

by required reserve averaging, i.e. maintaining the averaged required reserves in the correspondent account and correspondent sub-account (sub-accounts) with the Bank of Russia in the currency of the Russian Federation (hereinafter jointly referred to as the correspondent accounts), and in certain cases in the correspondent accounts and the account opened irrespective of the currency of reservable liabilities for required reserves deposited with the Bank of Russia if the credit institution fails to average the required reserves.

Credit institutions record the required reserves in the following balance sheet accounts:

No. 30202 'Credit Institutions' Required Reserves Deposited with the Bank of Russia in the National Currency Accounts',

No. 30204 'Credit Institutions' Required Reserves Deposited with the Bank of Russia in the Foreign Currency Accounts';

No. 30238 'Credit Institutions' Required Reserves Deposited with the Bank of Russia if Required Reserves are not Averaged'.

Interest is not charged on required reserves deposited by credit institutions with the Bank of Russia.

Required reserves deposited by the credit institution in required reserve accounts with the Bank of Russia are unrecoverable.

Reservable liabilities

 Reservable liabilities structure and categories

Reservable liabilities are the credit institution's liabilities in the currency of the Russian Federation and in the foreign currency whose structure is determined in Chapter 2 of Bank of Russia Regulation No. 507-P, dated 1 December 2015.

Reservable liabilities of credit institutions are categorised as follows:

'the credit institution's liabilities to non-resident legal entities' include liabilities to non-resident legal entities (including liabilities to non-resident banks) and non-resident sole traders in the currency of the Russian Federation and (or) foreign currency arising from bank (correspondent) account agreements and fund raising agreements (loan, deposit and other agreements);

'the credit institution's liabilities to individuals' include liabilities to individuals (resident and non-resident) in the currency of the Russian Federation and (or) foreign currency arising from bank deposit agreements (including saving certificates) and bank account agreements;

'other liabilities' of the credit institution in the currency of the Russian Federation and (or) foreign currency.

Liabilities excluded from reservable liabilities (not included in reservable liabilities) pursuant to the credit institution's professional judgement

a) Liabilities to legal entities maturing in at least three years (funds borrowed from legal entities (resident and non-resident) and sole traders for at least three-year term).

The credit institution is not entitled to exclude balances of certain personal cash accounts (or part thereof) of legal entities and sole traders maturing in at least three years from balances of balance sheet accounts if the maturity is reduced to less than three years and (or) in case of early (less than three years) cash repayment under at least one agreement.

The credit institution is not entitled to make these exclusions under any agreement (except for subordinated loan (deposit) agreements) within three reporting periods from the reporting period when the event occurs which allows drawing a conclusion on the reduction of the term and (or) termination of the agreement, and (or) early (less than three years) cash repayment.

The credit institution is entitled to review its decision on excluding certain personal account balances (including the structure of the personal accounts being excluded) from reservable liabilities:

once a calendar year, irrespective of the circumstances specified in paragraph two of Sub-clause 2.5.5 of Clause 2.5 of Bank of Russia Regulation No. 507-P, dated 1 December 2015;

when compiling the Calculation and the accompanying documents after the expiry of the three reporting periods during which the credit institution did not exclude certain personal account balances from reservable liabilities.

This decision is documented in the credit institution's internal document, the credit institution presents this decision to the authorised Bank of Russia establishment (in any form) complete with the Calculation.

b) Liabilities on bonds maturing in at least three years issued by credit institutions.

c) Cashless liabilities (precious metals and natural gems in the physical form and in the form of securities borrowing).

d) Liabilities to another credit institution registered as appropriate and acting under the banking licence issued by the Bank of Russia (except for liabilities to the credit institution acting as a trust manager), liabilities to

an international finance organisation, acting under the international founding treaty (agreement) to which the Russian Federation is a party, as well as liabilities to Vnesheconombank and the Bank of Russia arising from agreements (except for liabilities on debt securities issued and the related interest), and liabilities to the state corporation Deposit Insurance Agency (hereinafter referred to as the DIA) and (or) liabilities to investors other than credit institutions, arising from financial assistance under the plans for DIA participation in credit institution bankruptcy prevention.

e) Debt of the credit institution's separate divisions.

The amount of the credit institution's liabilities on debt securities issued is included in reservable liabilities net of the amount of the credit institution's liabilities the credit institution calculates through the application of an adjustment ratio

to the amount of the credit instutution's liabilities on debt securities issued, and is calculated using the following formula:

where,

is the amount of the credit institution's reservable liabilities on debt securities issued,

is the amount of the credit institution's liabilities on debt securities issued,

is the adjustment ratio.

The adjustment ratio is a numerical factor between 0 and 1, established by the Bank of Russia Board of Directors to determine the amount of the credit institution's liabilities to other resident credit institutions on debt securities issued subject to exclusion from reservable liabilities (it is published in the Bank of Russia Bulletin).

The required reserves on liabilities in the currency of the Russian Federation are reduced by the amount of the credit institution's vault cash in rubles not exceeding 25% of the required reserves on liabilities in the currency of the Russian Federation.

Procedure for regulating the amount of required reserves

The Bank of Russia (authorised Bank of Russia establishment) regulates the amount of required reserves at the location of the head office of the credit institution on a monthly basis within three business days from the submission of the Calculation, as established by the Bank of Russia.

Credit institutions shall provide the Calculation on the 10th business day of the month following the reporting one.

Required reserves of the credit institution can be regulated on an extraordinary basis:

upon the decision of the Bank of Russia Board of Directors;

upon the decision of the authorised Bank of Russia establishment at the request of the credit institution provided that reservable liabilities fall by at least 10% of the credit institution's total balance sheet as at the first day of the current month (at the request of the credit institution).

Time-frame for regulating the amount of required reserves.

Procedure for compiling the Calculation

The amount of required reserves is calculated for the reporting month from the first day of the reporting month till the first day of the month following the reporting one, inclusive.

The Calculation and the accompanying documents:

Calculation according to the form provided in Appendix 1 to Bank of Russia Regulation No. 507-P, dated 1 December 2015;

accompanying documents according to the form provided in Appendices 2-6 to Bank of Russia Regulation No. 507-P, dated 1 December 2015;

statements on the absence of balances and on the non-application of professional judgement (in any form);

necessary explanations, including the information on excluding long-term liability balances (as decided by the credit institution, if necessary).

The Calculation is based on the documents compiled in compliance with Appendices 2-6 to Bank of Russia Regulation No. 507-P, dated 1 December 2015, and the credit institution's balance sheet data on required reserves accounts and required reserves account if the required reserves are not averaged.

Documents according to the form provided in Appendices 2-6 to Bank of Russia Regulation No. 507-P, dated 1 December 2015, are based on the data from daily consolidated balance sheets of the credit institution.

The document according to the form provided in Appendix 2 to Bank of Russia Regulation No. 507-P, dated 1 December 2015, is compiled guided by the following requirements:

its electronic submission to the authorised Bank of Russia establishment requires that all balance sheet sub-accounts to record reservable liabilities used in the Calculation be indicated. The absence of balances of the balance sheet account is recorded as zero;

its hard copy submission to the authorised Bank of Russia establishment may require that the balance sheet sub-accounts determined in the effective chart of accounts of the credit institution be indicated, except for those with zero balances during the reporting period.

The document in accordance with Appendix 5 to Bank of Russia Regulation No. 507-P, dated 1 December 2015, is compiled to determine the amount of the credit institution's vault cash in the currency of the Russian Federation excluded from the calculation of required reserve ratios.

The calculation of certain indicators used to compile documents according to the form provided in Appendices 2 and 5 to Bank of Russia Regulation No. 507-P, dated 1 December 20151, employs the chronological average formula indicated in Clause 1 of Appendix 9 to Bank of Russia Regulation No. 507-P, dated 1 December 2015.

Documents according to the form provided in Appendices 3 and 6 to Bank of Russia Regulation No. 507-P, dated 1 December 2015, are compiled if the credit institution applies a professional judgement.

Procedure for filing the Calculation

The Calculation is filed to the authorised Bank of Russia establishment in due time together with the documents compiled in compliance with Appendices 2-6 to Bank of Russia Regulation No. 507-P, dated 1 December 2015 in a single copy.

Documents compiled in compliance with Appendices 2-4 to Bank of Russia Regulation No. 507-P, dated 1 December 2015, may not be attached to the Calculation provided that all the balance sheet accounts (certain personal accounts of the balance sheet accounts) indicated in these documents have zero values in the reporting period.

Documents compiled in compliance with Appendices 3 and 6 to this Regulation may not be attached to the Calculation unless the credit institution applies a professional judgement.

In these cases, the credit institution attaches to the Calculation a statement on the absence of balances of the respective balance sheet accounts (certain personal accounts of the balance sheet accounts) or on the non-application of a professional judgement, in any form.

The Calculation violating the requirements is deemed not filed. In this case the authorised Bank of Russia establishment notifies the credit institution that the Calculation violates the requirements no later than the business day following the day the credit institution has filed the Calculation.

During the regulation of required reserves, the credit institution is entitled to adjust the Calculation and the attached documents.

The adjusted Calculation is provided with explanations highlighting the adjustments made.

Should the credit institution adjust the Calculation and the attached documents, the period of required reserves regulation is not extended.

Should the credit institution fail to file the Calculation in due time, this shall be deemed as a breach of the reporting time and a reason for the Bank of Russia to take measures envisaged by Article 74 of Federal Law No. 86-FZ, dated 10 July 2002, 'On the Central Bank of the Russian Federation (Bank of Russia)'.

Activities of the authorised Bank of Russia establishment and the credit institution during required reserve regulation

During the regulation, the authorised Bank of Russia establishment performs the following functions:

monitoring compliance of the Calculation and the attached documents with the requirements of Bank of Russia Regulation No. 507-P, dated 1 December 2015, with the credit institution's balance sheet data as at the reporting date.

compiling a Certificate of required reserve averaging (hereinafter referred to as the Certificate) in compliance with Appendix 7 to Bank of Russia Regulation No. 507-P, dated 1 December 2015; revealing presence (absence) of the amount of failed required reserve averaging; issuing a properly compiled copy of the Certificate to the credit institution (if the credit institution has exercised the right to average the required reserves).

compiling a Statement on required reserve regulation (hereinafter referred to as the Regulation Statement) based on the Calculation and the Bank of Russia balance sheet data in compliance with Appendix 8 to Bank of Russia Regulation No. 507-P, dated 1 December 2015; revealing Calculation underpayment or overpayment of the amount subject to transfer to the required reserve account if the credit institution has failed to average the required reserves or refund from the required reserve account if the credit institution has failed to average the required reserves; offsetting the payments due in the required reserve accounts on liabilities in the currency of the Russian Federation, liabilities in the foreign currency and the required reserve account if the credit institution has failed to average the required reserves;

refunding the overpayment revealed in the Calculation and (or) the amount of failed required reserve averaging, which has been transferred (written down) as a result of required reserve regulation in accordance with the Calculation for the previous reporting period.

The underpayment is an amount of the excess of the required reserve calculation value over the required reserves deposited by the credit institution in the required reserve accounts.

The overpayment is an amount of the excess of the required reserves deposited by the credit institution in the required reserve accounts over the required reserve calculation value.

The amount of failed required reserve averaging is an amount of funds calculated on the basis of the failed required reserve averaging value determined as an amount of the excess of the required reserve averaging value provided to the credit institution over the actual required reserve averaging value of the credit institution during the averaging period.

During the regulation period, the credit institution shall implement:

money transfer (by a payment order (payment orders)) to the required reserve account (accounts) with the Bank of Russia to redeem the underpayment in the amount indicated in the Regulation Statement;

money transfer (by a payment order) to the required reserve account if the credit institution fails to average the required reserves in the amount indicated in the Regulation Statement, if the credit institution fails to average the required reserves in the previous averaging period and receives the right to do so in the current period.

Memo item: Statistics on the credit institutions' required reserves deposited in separate accounts with the Bank of Russia.

Procedure for depositing required reserves through required reserve averaging by credit institutions

The credit institution receives the right to average the required reserves if it meets the following criteria as at the Calculation filing date:

the bank shall be included in classification group 1, 2 or 3 in compliance with Bank of Russia Ordinance No. 2005-U, dated 30 April 2008, and the non-bank credit institution shall be included in classification group 1 or 2 in compliance with Bank of Russia regulations establishing the criteria for determining financial standing of non-bank credit institutions;

it has no outstanding underpayments and fines for violating mandatory reserve requirements;

it has managed to avoid a repeated (for the second time in a row) failure to average the required reserves;

it has no overdue monetary liabilities to the Bank of Russia, including on Bank of Russia loans and related interest.

To have the right to average the required reserves in the current averaging period, the credit institution shall calculate and indicate in the Calculation the required reserve averaged value.

When calculating the amount of required reserves to be deposited with the Bank of Russia through the credit institution's required reserve averaging within the required reserve averaging period (hereinafter referred to as the averaging period) under the procedure envisaged by Chapter 5 of Bank of Russia Regulation No. 507-P, dated 1 December 2015, the averaging ratio shall be applied to the required reserve ratiwww.

The schedule of averaging periods for the calendar year is established by the Bank of Russia Board of Directors and published in the Bank of Russia Bulletin and on the Bank of Russia website.

Schedule of averaging periods for the calendar year

The authorised Bank of Russia establishment verifies the credit institution's compliance with the criteria as at the Calculation filing day.

Should the credit institution meet the criteria, the authorised Bank of Russia establishment decides on granting the credit institution the right to average the required reserves in the averaging period corresponding to the reporting period and establishes the required reserve averaged value on the Calculation.

Should the credit institution fail to meet the criteria, the authorised Bank of Russia establishment decides on denying to grant the credit institution the right to average the required reserves.

The credit institution having the right to average the required reserves should average the required reserves during the averaging period, i.e. maintain the required reserve averaged value in the amount no lower than the required reserve averaged value established in the Calculation for the averaging period.

The actual required reserve averaged value maintained by the credit institution is calculated on the basis of daily balances of correspondent accounts with the Bank of Russia and in certain cases total daily balances of correspondent accounts and of the required reserve account if the credit institution fails to do the averaging during the averaging period.

The arithmetic mean formula indicated in Clause 2 of Appendix 9 to Bank of Russia Regulation No. 507-P, dated 1 December 2015, is used to calculate the actual required reserve averaged value maintained by the credit institution.

The credit institution loses the right to average the required reserves in the current required reserve averaging period in case of repeated (for the second time in a row) failure to average the required reserves.

The credit institution, which has failed to obtain the right to average the required reserves, shall deposit required reserves through transferring them to required reserve accounts under the procedure established by paragraph two of Clause 4.4 of Bank of Russia Regulation No. 507-P, dated 1 December 2015.

Memo item: Statistics on the credit institutions' required reserve averaging.

Memo item: Balances of credit institutions' correspondent accounts with the Bank of Russia (monthly average), required reserves and the required reserve averaged value.

Designated reductions in required reserve accounts (required reserve utilisation)

Reductions in required reserve accounts (required reserve utilisation) are envisaged in the following cases:

as a result of the regulation of the amount of required reserves (when the amount of the reservable liabilities of the credit institution and (or) required reserve ratios reduce and (or) the Bank of Russia averaging ratio increases);

when the credit institution is granted the right to average the required reserves (i.e. maintaining the required reserve averaged value in the credit institution's correspondent account (correspondent sub-account (sub-accounts)) with the Bank of Russia;

after the revocation (cancelling) of the banking licence issued by the Bank of Russia (required reserves are transferred to the credit institution's correspondent account and used under the procedure established by the federal laws and related regulations).

Bank of Russia sanctions against credit institutions violating mandatory reserve requirements

Should the credit institution fail to carry out the activities established by Clause 4.4 of Bank of Russia Regulation No. 507-P, dated 1 December 2015, during the regulation period, the authorised Bank of Russia establishment writes down the amount underpaid and (or) the amount of the failed required reserve averaging from its correspondent accounts.

Monetary funds and (or) the amount of the failed required reserve averaging are written off to redeem the underpayment under the Calculation for the reporting period from the first day after the expiry of the regulation period until the complete redemption till the day the credit institution files a Calculation for the next reporting period, inclusive.

In compliance with Article 38 of Federal Law No. 86-FZ, dated 10 July 2002, 'On the Central Bank of the Russian Federation (Bank of Russia)', should the credit institution violate the mandatory reserve requirements, the authorised Bank of Russia establishment imposes a penalty.

The penalty notice is sent to the credit institution for a free will payment of penalty for the violation of mandatory reserve requirements.

The authorised Bank of Russia establishment calculates a flat penalty in rubles depending on the amount underpaid and (or) the amount of failed required reserve averaging indicated in Line 6 of the Certificate or in the inspection report with the use of the Bank of Russia refinancing rate (Bank of Russia Ordinance No. 3894-U, dated 11 December 2015, ‘On the Bank of Russia Refinancing Rate and the Bank of Russia Key Rate’), effective as of the penalty calculation date, using the formula stipulated in Clause 3 of Appendix 9 to Bank of Russia Regulation No. 507-P, dated 1 December 2015.

Should the credit institution fail to meet the instruction, the Bank of Russia shall be entitled to levy the penalty for violating the mandatory reserve requirements from the credit institution in a court of law. In this case the penalty shall not exceed the amount calculated proceeding from the dual Bank of Russia refinancing rate effective as at the date of the court's ruling.

Should the calculated penalty amount to below 100 rubles, the penalty is not subject to payment (recovery) and shall not be recorded either in the Bank of Russia's or the credit institution's balance sheets.

The credit institution's compliance with the reserve requirements is a criterion for the credit institution's admission to Bank of Russia monetary policy operations (refinancing operations, deposit operations, repos, FX swaps, and other Bank of Russia operations).

Sources of information on required reserves

Information on the required reserves (reserve requirements) is provided in the following Bank of Russia publications:

Bank of Russia Bulletin;

Bank of Russia Statistical Bulletin:

Table 1.17 'Monetary Base (Broad Definition)';

Table 2.3 'Required Reserves Ratios';

Table 2.4 'Scaling Factor Which Is Used to Correct the Sum of the Credit Institution Liabilities to Other Credit Institutions – Residents for Issued Securities';

Table 2.5 'Required Reserves (Averaged Amount) Held by Credit Institutions in Their Correspondent Accounts (Sub-accounts) with the Bank of Russia';

Table 6.2.6 'Credit Institutions Using the Right to Average the Required Reserves within Averaging Period from 10 _____ to 10 ______ Grouped by Registered Authorised Capital';

Chart 7.6 'Averaged Amount of Required Reserves of Credit Institutions Exercising the Averaging Right within Averaging Period from 10 ____ to 10 ____ (Credit Institutions Grouped by Size of Registered Authorised Capital)';

Chart 7.7 'Structure of Broad Monetary Base as of ____';

Section 8 'Summary Methodology'.

Guidelines for the Single State Monetary Policy;

Bank of Russia Annual Report;

Monetary Policy Report.

 

Last updated: 13 March 2016.

Should you have any questions with regard to required reserve depositing, please, call to the Depository Operations and Mandatory Reserve Requirements Methodology Section of the Bank of Russia General Economic Department: +7 (495) 771-42-17; +7 (495) 771-45-95.

Please send your proposals on improving the mechanism for mandatory reserve formation by e-mail to the Depository Operations and Mandatory Reserve Requirements Methodology Section of the Bank of Russia General Economic Department (vvv4@cbr.ru).

Mandatory Reserve Requirements