Bank of Russia new macroprudential regulation mechanism becomes effective
The Bank of Russia amended the current legislative base to pursue more effective macroprudential policy, i.e., the policy to ensure financial stability.
Under the new approach, the Bank of Russia Board of Directors will set risk-based capital buffers in order to calculate capital adequacy of credit institutions. Previously, the prudential regulation of credit institutions was required to be amended for this purpose.
This approach will apply to certain types of assets stipulated in Bank of Russia Ordinance No. 4892-U, dated 31 August 2018, ‘On Types and Characteristics of Assets for Which Risk-based Capital Buffers are Set and on the Methodology for Applying These Buffers to the Said Types of Assets for Credit Institutions to Calculate Their Capital Adequacy Ratios’. The required amendments have been made to Bank of Russia Instruction No. 180-I, dated 28 June 2017, ‘On Banks’ Required Ratios’ with regard to bringing risk weights of these assets into line with their standard values stipulated by Basel III. The documents have been registered by the Ministry of Justice of the Russian Federation and become effective 10 days after their official publication.
The requirements for banks’ capital adequacy will not be increased in the course of transition to the new regulation mechanism. However, if the Bank of Russia Board of Directors further takes a decision to raise capital buffers, it will become effective in three months.
The introduction of the requirement to calculate debt burden ratio (DBR) is another key change in the approaches towards banking regulation. Starting from 1 October 2019, credit institutions will be required to calculate their DBRs. In 2019, the Bank of Russia will calibrate the dependence of risk on DBR to use it for setting the values of macroprudential buffers. This standard will cover credit institutions, excluding non-bank credit institutions, authorised to make funds transfers without opening bank accounts and conduct other related banking operations. The Bank of Russia also intends to make DBR calculation mandatory for microfinance organisations and use it for their regulation.
Amendments to Bank of Russia Ordinance No. 4212-U, dated 24 November 2016, ‘On the List, Forms and Procedure for Compiling and Submitting Credit Institutions’ Reporting Forms to the Central Bank of the Russian Federation’ supposing the inclusion of a new section in the Form 0409135 ‘Information on Credit Institutions' Required Ratios and Other Performance Indicators’ are expected to become effective from 1 January 2019. This section will feature information about assets subject to risk-based capital buffers application.