Bank of Russia tightens capital quality requirements for credit institutions
Tighter requirements for the quality of banks’ capital sources will help banks improve their capacity to absorb potential losses from risk events.
The regulator has revised materiality thresholds. When these thresholds are exceeded, improper assets generated from banks’ own funds (for example, insurance commissions paid from bank loans) shall be deducted from capital. Now, the materiality thresholds include absolute amounts, namely a ₽100 million individual limit for each improper asset and a ₽10 billion aggregate limit for all such assets. Additionally, banks will be able to adjust to the new requirements step by step and extract ineligible items from capital according to the established schedule (30% of the required deduction from 1 April 2024, 60% — from 1 April 2026, and 100% — from 1 April 2026).
From now on, banks shall not include new foreign currency subordinated instruments in their capital. This will help mitigate long-term foreign currency risk at the time of redemption.
Furthermore, capital shall also exclude non-repayable financing unless there is a condition that such financing is not subject to repayment. Banks shall bring the financing they have already received in line with the new requirements by 1 April 2024.
The list of indirect investments in real estate that are taken into the calculation of the capital-reducing immobilisation ratio will include property sales on non-market terms.