Internal control becomes easier to arrange for banks with basic licences

Executives in charge of risk management services in banks with basic licences will be able to simultaneously supervise internal control services. This will constitute regulatory relaxation for these banks, thereby demonstrating the consistency of Bank of Russia measures to reduce their regulatory burden. According to the latest release of the quarterly bulletin Banking Regulation, this approach has been implemented in several normative acts assessing the regulatory impact, published on the Bank of Russia web-site in the third quarter of this year.

This novation helps do away with the excessive formalisation of requirements for the system of internal control in banks with basic licences without compromising its efficiency.

In addition, the bulletin notes that in order to enhance the sustainability of Russian banks, the Bank of Russia has proceeded with the incorporation of Basel III components into banking regulation.

Specifically, on 14 September 2017 the Bank of Russia published Regulation No. 596-P, dated 26 July 2017, ‘On the Procedure for Systemically Important Credit Institutions to Calculate Structural Liquidity Ratio (Net Stable Funding Ratio) (Basel III)’ which will become effective from 1 January 2018. In economic terms, the structural liquidity ratio (net stable funding ratio) seeks to provide a ‘robust’ funding structure for credit institutions and limits the excessive transformation of short-term and less stable sources in the resource base into long-term assets.

Additionally, in 2017 Q3, in order to assess its regulatory impact, the draft ordinance ‘On Amending Bank of Russia Instruction No. 180-I, Dated 28 June 2017, ‘On Banks’ Required Ratios’, was posted by the Bank of Russia on its website . The draft stipulates the implementation of the BCBS standard, one of the key elements of Basel III framework, and sets forth requirements to calculate, and introduce from 1 January 2018, banks’ capital adequacy ratio adjusted by risk-weighted assets at 100% (financial leverage ratio N1.4). This requirement will be only applicable to banks with universal licence.