Bank of Russia commentary on temporary regulatory easing for banks due to coronavirus spread
In recent years, the resilience of the Russian financial system to increased volatility events on the back of drastic changes in oil prices has significantly improved. Stress-tests conducted by the Bank of Russia also confirm this.
The Bank of Russia and financial institutions are reviewing the potential impact of the increased volatility in the FX and securities markets, observed in the past few days, on their financial standing. Additional regulatory measures aimed at improving financial market resilience will be taken if necessary.
The Bank of Russia reminds credit institutions about the options that are already available under the current regulation. In particular, they can refrain from complying with the capital conservation buffer and the systemic importance capital buffer. According to the mechanism of application of these instruments, it only restricts the distribution of credit institutions' profit.
In addition, taking into account the spread of the coronavirus infection and its effect on economic activity in certain sectors, the Bank of Russia plans to implement the following measures:
- until 30 September 2020, credit institutions will be given an option not to downgrade the assessment of debt servicing quality irrespective of the financial position of a borrower in such sectors as tourism and transport under loans restructured due to the contraction of the borrower’s revenue owing to the coronavirus infection;
- until 30 September 2020, credit institutions will be given an option not to downgrade the assessment of the financial position of a borrower in such sectors as tourism and transport for the purpose of the calculation of loss provisions if the changes in the borrower’s financial standing have been caused by the coronavirus infection;
- until 30 September 2020, a reduced risk ratio of 70% will be introduced for ruble-nominated exposures on organisations producing pharmaceuticals and medical equipment;
- until 30 September 2020, add-ons to risk weights on foreign currency loans provided to organisations producing pharmaceuticals and medical equipment will be reduced to zero.