Banking regulation: 2019 Q1 Bulletin released

The Bulletin presents information about Bank of Russia regulatory acts issued within the past quarter that introduced a number of changes to the regulation of credit institutions:

• the requirements for the disclosure of information by credit institutions (banking groups) about risks assumed were clarified and the disclosure procedure for non-bank credit institutions (NCIs) was simplified;
• the procedure for the calculation of market risk was clarified for the purpose, among other things, of decreasing the dependency of banking regulation on international credit ratings;
• the procedure for assessing banks’ economic position was amended to maintain the existing approach when implementing IFRS 9 requirements;
• the contents of data disclosed by credit institutions in explanatory notes on financial statements when implementing IFRS 9 requirements were clarified;
• the deadlines for performing internal capital adequacy assessment procedures (ICAAP) were changed.

The Bulletin also contains information about information letters published by the Bank of Russia on its website containing recommendations regarding the implementation of certain Bank of Russia regulations, in particular, with respect to the procedure of creating loan loss provisions for borrowers subject to sanctions of foreign states or unions (these borrowers are subject to a preferential approach).

Furthermore, the Bulletin contains information about draft regulations posted on the Bank of Russia’s website in the first quarter of 2019 for the assessment of their regulatory effect. Among other things, these draft regulations introduce the following changes to governing credit institutions’ risks:

• a new standardised approach to assessing credit exposure with respect to claims to sovereign borrowers and counterparties;
• new requirements for the operational risk, information security risk (including cyber-risk), and information systems risk management framework, maintaining an operational risk event database, and internal reporting of credit institutions on operational risk;
• clarification of requirements to the risk and capital management framework in credit institutions and banking groups;
• banks with a basic licence that are not parent credit institution and banking group participants will no longer be required to submit IFRS financial statements;
• a new beneficial approach to provisioning with respect to SME borrowers;
• banks that have been permitted to calculate credit risks based on internal ratings will be able to calculate loan loss provisions using internal methodology and quantitative credit losses assessment models.