Bank of Russia continues to implement international standards for calculating credit institutions’ capital

The Bank of Russia has updated the Capital Calculation Methodology to introduce an additional deduction: banks’ investments in so-called TLAC of global systemically important banks (G-SIBs) will be excluded from Tier 2 capital sources of banks with a universal licence. TLAC instruments are financial instruments ensuring G-SIBs’ loss absorbing capacity at the stage of their bail-out through termination of liabilities on instruments or conversion of claims thereon into G-SIBs’ ordinary shares.

In addition, the Bank of Russia has introduced a requirement for the stepwise exclusion from banks’ capital structure of government support instruments provided before 1 March 2013 and not complying with Bank of Russia Regulation No. 646-P, dated 4 July 2018, ‘On the Methodology for Measuring Credit Institution Capital (Basel III)’ (beginning from the effective date of the updated Capital Calculation Methodology — in the amount of 50%, and from 1 January 2020 — 100% of the amount available as of 1 January 2018).

The approved changes to the methodology for calculating credit institutions’ capital are in line with the international regulation approaches determined by the Basel Committee on Banking Supervision.

Bank of Russia Ordinance No. 5163-U has been registered with the Ministry of Justice of the Russian Federation and comes into force on 14 October 2019.