Russian financial market shows stability amid global volatility

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In August 2018, the Russian financial market had to function in a highly volatile environment caused by net capital outflow from EME markets and tougher sanctions rhetoric. The unfavourable external climate shaped under the escalation of risks in highly dollarised economies (Turkey) and highly indebted countries (Argentina). The financial stability indicators in Russia are, on the contrary, intact, reads the August issue of Financial Market Risks Review.

OFZ yields adjusted in August under the influence of non-residents’ sales and were close to the level of other comparable EMEs. The trend of non-residents abandoning domestic public debt markets in 2018 was characteristic of the majority of EMEs given the overall decline in risk appetite.

The surge in volatility in August did not have a material effect on the stability of the Russian financial market. Revaluation of credit institutions’ investments in securities, including foreign currency revaluation, had little impact on their capital. Nevertheless, if the situation deteriorates, the Bank of Russia may impose a temporary moratorium on the recognition of negative revaluation of securities, thus mitigating market risk sensitivity among market players.

Amendments to the market risk1 regulation are expected to become effective in autumn 2018. The amendments are designed to make banking regulation less dependent on external ratings. The impact of this innovation on risk and capital indicators estimated on a sample of 226 credit institutions showed that the change in regulation would not have a material influence on the size of a special interest rate risk and banks’ capital adequacy ratios. 

1 Bank of Russia Regulation No. 511-P, dated 3 December 2015, ‘On the Procedure for Calculating Market Risk by Credit Institutions’.

21 September 2018

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