Bank of Russia improves regulation of foreign exchange and market risks
Draft regulations on the limits of open currency positions (OCPs) and the measurement of the market risk have been finalised with due regard to the comments and suggestions of the banking community.
The original goal of the regulation, that is, to ensure a higher resistance of credit institutions to market risks, is retained. This primarily concerns the reduction of foreign exchange risk, including balance sheet risk, and prevention of the fictitious hedging of positions.
The new limit on the balance sheet currency position (to be added to the existing OCPs limits) is set at a less conservative level — it was raised from 20% to 50%.
Key changes in the revised draft regulations also included the procedure for determining transactions as inappropriate for risk hedging. They make it possible to optimise the operational load on banks when assessing counterparties and transactions and ensure the risk sensitivity of such assessment.
The new regulation is scheduled to become effective on 1 April 2024.