Ensuring the stability of the financial market is one of the Bank of Russia’s objectives as determined in Article 3 of the Federal Law ‘On the Central Bank of the Russian Federation (Bank of Russia)’; it is achieved through the implementation of macroprudential policy.
Financial stability can be defined as:
- the financial system’s resilience to shocks,
- the uninterrupted and efficient operation of the financial system and provision of financial services.
Macroprudential policy is a set of measures aimed at the mitigation of systemic risk in the financial sector as a whole or in its individual segments, and at the prevention of systemic financial crises, that is, the risk of situations in which many participants in the financial sector become insolvent and lose liquidity, and, as a result, need the support of monetary or prudential supervision authorities to continue operation.
To enhance interagency communication, the National Council for Financial Stability (NCFS) was established in July 2013. The NCFS includes senior officers of the Ministry of Finance, the Ministry of Economic Development, the Deposit Insurance Agency, and the Bank of Russia, as well as representatives of the Presidential Administration. The NCFS discusses financial stability issues and delivers recommendations to the authorities. When the Ministry of Finance, the Ministry of Economic Development or the Bank of Russia receive recommendations from the NCFS, they must report on whether they comply with them or not within the timeframe indicated in the meeting minutes (the comply-or-explain principle).
In 2011, the Bank of Russia established the Financial Stability Department which regularly monitors systemic risks (to credit and non-bank financial institutions, development institutions and shadow banking), elaborates macroprudential policy tools and assesses their effectiveness, supervises and regulates systemically important financial market infrastructure organisations, and participates in the stress-testing of credit institutions, NPFs and systemically important insurance companies.