Regulatory easing and new support measures for dealers, brokers, forex dealers, non-governmental pension funds, trust managers, and management companies
In 2022, the Bank of Russia, in order to ensure the stability of the market of financial intermediaries and collective investment, granted significant support to financial institutions, including regulatory easing, aimed at maintaining market participants’ financial stability and ability to fulfil their obligations to clients, as well as to reduce the impact of potential future sanction risks.
Based on the assessment of the situation in the financial market and considering its gradual stabilisation, lower volatility, and financial institutions’ adjustment to the operation in the new environment, the Bank of Russia has decided to extend certain support measures implemented in 2022 and terminating from 1 January 2023 and to introduce additional measures.
The Bank of Russia Board of Directors will approve relevant decisions within its special powers1 until the end of 2022. The Bank of Russia will also issue information letters and regulations. Details will be provided to market participants after the approval of the relevant decisions.
1. The Bank of Russia will allow dealers, brokers, forex dealers, trust managers (hereinafter, professional market participants) and management companies to make provisions for blocked assets (to discount their value) gradually during 2023 in order to calculate the capital adequacy ratio and equity capital, whereas the blocked assets shall be excluded from the calculation of the liquidity coverage ratio.
The Bank of Russia has assessed the impact of the value of the blocked assets on the requirements for financial stability. According to the results of the assessment, there is no systemic effect on market participants as regards the impact of potential losses related to the said assets on institutions’ financial stability.
In order to smooth the negative impact of the recognition of losses related to the completely blocked assets and considering the cancellation of regulatory easing, the Bank of Russia has decided to allow professional market participants and management companies to gradually, throughout 2023, form estimated loss provisions for the blocked assets within the capital adequacy ratio and to discount their value stage by stage when calculating equity capital.
When this approach is used, the value of the assets on the books shall be fixed in rubles at the exchange rate determined according to the procedure established by the Bank of Russia’s regulation on the accounting of blocked assets.
Companies will be able to use the option of gradual provisioning, if they do not make a decision on dividend payouts (profit distribution) during the period from 1 January 2023 through 31 December 2023.
When a broker calculates the liquidity coverage ratio, blocked assets are not to be included in the calculation.
2. Measures to be extended (including in a modified form)
— Resumption of the mandatory disclosure of financial statements, except information that is sensitive to sanction risks — from 1 January 2023 (financial statements for 2022 are also subject to disclosure).
— The right not to disclose the information envisaged by the Bank of Russia Board of Directors’ decision, dated 14 April 2022,2 — through 31 December 2023, as well as the information envisaged by the Bank of Russia Board of Directors’ decision, dated 18 March 2022,3 about the ownership structure, members of the management bodies and other officials of a professional market participant, a management company (MC), or a non-governmental pension fund (NPF), about the reorganisation of the said non-bank financial institutions and persons controlling NPFs — until 1 July 2023.
— Non-application of enforcement measures for a failure to comply with the requirements for auto-follow and auto-advising programmes — until 1 April 2023.
— Non-application of enforcement measures against trust managers for a failure to bring a client’s investment portfolio into compliance with the client’s investment profile if it is legally and/or practically impossible to do so — until 1 April 2023.
— Permission for the heads of the MCs of unit investment funds (UIFs) to send a single notice to the Bank of Russia about a violation that occurred because it was impossible for the UIF MC to calculate the UIF’s net asset value (NAV), which was the reason for the suspension of the issuance, redemption and exchange of investment units — through 31 December 2023.
— Non-application of enforcement measures against the MCs of closed-end UIFs for qualified investors for a failure to bring the trust management rules (TMRs) into compliance with the new requirements — until 1 April 2023.
— Suspension of the deadline for bringing the structure of UIFs’ assets into compliance with the requirements of Bank of Russia Ordinance No.
— Non-application by the MCs of exchange-traded UIFs including foreign securities of the requirement for the minimum frequency of determining the calculated value of one investment unit at least every 15 seconds, provided that they determine this value at least every 30 minutes — through 31 December 2023.
— Non-application of enforcement measures against NPFs for a failure to timely transfer pension payments to accounts opened beyond the Russian Federation if it is legally and/or practically impossible to do so — through 31 December 2023.
— The procedure for calculating the limit of financial leverage for an NPF in relation to the assets of the NPF’s pension savings portfolio: the calculation of the limit leaves out the assets received under repos that are frozen according to not only repo terms, but also the NPF’s investment declarations (non-application of enforcement measures) — until 1 July 2023.
— Temporary requirements for MCs’ and NPFs’ activities in connection with placements of substitute bonds, namely the establishment of the right to purchase substitute bonds and hold them in UIFs’ assets (pension reserves) instead of Eurobonds that were part of UIFs’ assets (pension reserves) if such bonds do not conform to certain requirements for the composition and structure of their assets — through 31 December 2023.
— The option to use credit ratings. In relation to bonds issued by a foreign special-purpose company and acquired before 25 February 2022, it is allowed to use credit ratings assigned by national rating agencies to a Russian company on whose behalf such bonds were issued. If this Russian company has no ratings, it is still possible to use the rating of such bond or its issuer assigned as of 1 February 2022 — through 31 December 2023.
3. Measures not to be extended after 2022
— Fixing of exchange rates, the value of securities, and risk rates when applying Bank of Russia regulations (for accounting and macroprudential regulation purposes).
— Extension of the deadlines for fulfilling supervisory orders and inquiries sent to financial market participants.
— Non-application of enforcement measures for a failure to comply with the liquidity coverage and capital adequacy ratios (LCR, CAR).
— Non-application of enforcement measures for a failure to comply with the requirements aimed at revealing a conflict of interest.
— Temporary requirements for the calculation by a broker of risk coverage ratios when fulfilling orders or changing the value of a client’s portfolio if the broker included this client in standard- or higher-risk categories (a decrease in the amount of leverage).
— Non-application of enforcement measures against MCs and NPFs for a failure to provide copies of ‘zero statements’ to a specialised depository and against MCs for a failure to notify the Bank of Russia of the above violations.
— Non-application of enforcement measures against MCs and NPFs for a failure to include in the calculation of equity capital the funds in settlement accounts and deposits with credit institutions affiliated with MCs and NPFs, respectively, if these credit institutions were sanctioned.
— Non-application of enforcement measures against open-end UIF MCs for a failure to comply with the requirements for the amount of a liquidity cushion5 provided that this violation was solely the result of market factors or MCs’ actions aimed at reducing possible risks or investment unit holders’ losses.
— Non-application of enforcement measures against UIF MCs for exceeding the maximum concentration per legal entity due to an increase in UIFs’ assets of the share of funds in accounts and deposits and/or claims under a brokerage agreement by no more than 50%, provided that such violation was solely the result of market factors or MCs’ actions aimed at reducing possible risks or investment unit holders’ losses.
— The procedure for calculating the limit of financial leverage for MCs in relation to UIFs’ assets: the calculation of the limit leaves out the assets received under repos that are frozen according to not only repo terms, but also the UIFs’ investment declarations (non-application of enforcement measures).
— Non-application of enforcement measures against UIF MCs for preparing and convening a general meeting of investment unit holders regarding urgent approval of changes and amendments to the TMRs aimed at mitigating the negative effect of the restrictions.
— Non-application of enforcement measures against the MCs of closed-end UIFs for qualified investors for exceeding the deadline for the calculation of NAV, provided that the latter is calculated by MCs within three business days after the day, as of which NAV shall be calculated.
— Urgent registration of changes and amendments to the TMRs of UIFs for non-qualified investors aimed at mitigating the negative effect of the restrictions.
— Deferral of the effective date of the requirements for NPFs as regards the annual inspection of the actuarial opinion, disclosure and submission of a report on the results of such inspection, as requested by parties concerned and to the Bank of Russia.
— Non-application of enforcement measures against the MCs of closed-end UIFs for qualified investors for a failure to apply uniform methods for assessing the value of assets being part of various UIFs and/or joint-stock investment funds managed by the same MC if the MC makes a decision on fixing the value of securities.
— Non-application of enforcement measures against NPFs and NPF MCs for a failure to comply with the restrictions established by Russian laws and Bank of Russia regulations for the structure of pension savings (PSs) and pension reserves (PRs), provided that such violation was solely the result of market factors and its amount does not exceed 50% of the amount of the restriction for the structure.
— Non-application of enforcement measures against NPFs and NPF MCs for concluding asset purchase transactions in the over-the-counter market, if there is no opportunity to conclude these transactions in the exchange market in order to fulfil obligations to depositors, members, and insured persons due to the lack of sufficient funds in PSs (PRs).
— Temporary requirements for NPFs’, MCs’ and professional market participants’ activities envisaging, in particular, these companies’ right to include payments on foreign debt securities, which were blocked due to the restrictions in European depository and clearing organisations, in the calculation of their equity capital, the LCR, and the CAR.
1 Draft Federal Law No.
2 The Bank of Russia Board of Directors’ decision on the list of non-bank financial institutions’ information subject to disclosure pursuant to Russian laws or Bank of Russia regulations, which non-bank financial institutions are entitled not to disclose, and on the list of information envisaged by Russian laws or Bank of Russia regulations, which the Bank of Russia is entitled not to disclose on its website.
3 The Bank of Russia Board of Directors’ decision on determining the list of information of credit institutions, non-bank financial institutions, and organisations providing professional services in the financial market subject to disclosure pursuant to Russian laws or Bank of Russia regulations, which credit institutions, non-bank financial institutions, and organisations providing professional services in the financial market are entitled not to disclose, and on determining the list of information envisaged by Russian laws or Bank of Russia regulations, which the Bank of Russia is entitled not to disclose on its website.
4 Bank of Russia Ordinance No.
5 Clause 2.9 of Bank of Russia Ordinance No.
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