JSC Raiffeisenbank authorised to use internal ratings-based approach

The Bank of Russia has permitted JSC Raiffeisenbank to use banking methodologies to manage credit risk and quantitative models to estimate credit risk using the internal ratings-based (IRB) approach to calculate capital adequacy ratios.

It took two years for Bank of Russia experts to validate the rating framework used by JSC Raiffeisenbank, including the time required to improve the methodologies in according with the regulator’s recommendations.

The authorisation will come into force on 1 February 2019 after the Supervisory Board of JSC Raiffeisenbank has adopted the decision to use these methodologies. Initially, the bank will have the right to use these models to implement the IRB approach with regard to credit claims on legal entities included in the bank’s application. In line with the Phased-out Transition Plan, JSC Raiffeisenbank will transfer the remaining credit claim segments to the IRB approach. These will not include assets, whose credit exposure JSC Raiffeisenbank will continue to calculate using the simplified standardised approach.

In late 2018, another systemically important credit institution filed an application to implement this approach. It is expected that the validation of its IRB methodologies and models will be conducted in the upcoming 18 months. This process points to a high degree of readiness among Russian systemically important banks to adopt advanced and modern risk assessment models. This will in turn allow the Bank of Russia to consistently introduce internationally accepted standards for capital adequacy assessment elaborated by the Basel Committee on Banking Supervision, as set out in Basel II Accord, into the Russian regulatory environment.

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