Bank of Russia implements additional measures to support financial sector and lending to economy

In order to cushion the impact of unfriendly actions taken by foreign countries and international organisations, the Bank of Russia is implementing a package of additional measures to support the financial sector and its capability to continue lending to the economy.

1. Some foreign companies have decided to sell their Russian business. In a number of cases, the Government Commission on Monitoring Foreign Investment may allow business ownership transfers. Such transfers will help preserve jobs and promote economic recovery.

In view of this, when calculating banks’ required ratios, the Bank of Russia will not apply increased risk ratios in relation to credit claims arising if, during the period until 1 January 2023, banks issue loans to finance Russian residents’ transactions to acquire companies’ shares (stocks) from non-residents, provided that they have a relevant permit from the Government Commission on Monitoring Foreign Investment.¹ Furthermore, banks will be allowed not to apply Clause 3.20 of Bank of Russia Regulation No. 590-P² when assessing the quality of such loans that stipulates that their quality category may not be higher than the third one. Transactions carried out to finance the acquisition of financial institutions’ shares (stocks) will not be subtracted from credit institutions’ capital.

This measure will remain effective until the repayment of the said loans issued before 1 January 2023.

2. Due to changes in country risk assessments according to export credit agencies’ classification for the Russian Federation and the Republic of Belarus, the Bank of Russia will not apply the 150% risk ratio to claims in rubles and foreign currency on credit institutions from these countries when calculating required ratios according to the standard approach. Furthermore, the 150% risk ratio will not be applied to claims on the Republic of Belarus and the National Bank of the Republic of Belarus amid the decrease in the long-term credit rating (within the standard and finalised approaches).

This measure will reduce the pressure on lending banks’ capital and support interbank lending, as well as help continue transactions with the sovereign debt instruments of Belarus.

Concurrently, when measuring market risk associated with Russian banks’ debt securities, the Bank of Russia will continue to apply the 8% risk ratio (corresponds to the 100% risk ratio used in credit risk assessments). As before, the Bank of Russia will apply the 12% risk ratio to the Russian banks’ bonds that are subject to the increased ratios when their credit risk is measured.

This measure will be effective through 31 December 2022.

3. The Bank of Russia will allow credit institutions to postpone loss provisioning for:

— claims on Central Counterparty National Clearing Centre (CCP NCC) and National Settlement Depository (NSD) amid the suspension of operations by foreign depositories providing storage of Russian issuers’ Eurobonds due to the restrictions; and

— assets blocked as a result of unfriendly actions taken by foreign countries and international organisations against Russia.

This measure will reduce regulatory risks for banks and the pressure on their capital, which will make it easier for them to adjust to the new conditions. Further on, when the situation stabilises and there is information regarding the recoverability of these assets, the Bank of Russia will make a decision on additional provisioning, if needed.

These assets are included in the calculation of a bank’s capital adequacy ratios with the 100% risk ratio and, to correctly assess the liquidity position, are excluded from liquid assets when calculating quick and current liquidity ratios (N2 and N3) and shall not be included in the numerator of the long-term liquidity ratio (N4).

The Bank of Russia also plans to ease the requirements for calculating prudential ratios in relation to non-bank financial institutions, such as professional securities market participants, non-governmental pension funds, and management companies.³

This measure will be effective through 31 December 2022.

4. The Bank of Russia will allow credit institutions to rely on data as of 1 July 2021 when assessing credit risk of legal entities — securities issuers for loss provisioning and required ratio calculations, if they have limited access to or lack up-to-date financial information that should be disclosed and/or provided (and have no possibility to receive such information on a bilateral basis under confidentiality agreements). In this case, an issuer should have no signs of default or bankruptcy, and any other negative data on its financial position and solvency.

This measure will be effective through 31 December 2022.

5. The Bank of Russia eases the requirements for the structural liquidity ratio (net stable funding ratio) N28 (N29) in order to maintain systemically important credit institutions’ capability to provide lending to the economy amid changes in the structure and maturities of liabilities and the blocking of some assets.

The Bank of Russia will not apply enforcement measures in cases when the actual value of the ratio declines below the allowed minimum as a result of a growing mismatch between stable funding sources and long-term assets caused by, among other factors, changes in the resource base, the blocking (inaccessibility) of assets or their poorer quality, an extension of loans, or any other similar factors.

This measure will be effective through 31 December 2022.

6. The Bank of Russia reminds credit institutions that, considering the current conditions, it is acceptable not to comply with the requirement for capital adequacy buffers. This is not deemed to be a bank’s failure to comply with the required ratios, but the bank should limit dividend and bonus payments to the management. If the bank does not comply with the requirements for the buffers, it should also prepare a simplified capital recovery plan listing specific measures and submit this plan to the Bank of Russia.

7. As the economic situation is complicated, the Bank of Russia recommends that both banks complying with the buffer requirements and non-bank financial institutions should not pay dividends in 2022.

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15.04.2022 12.23.44