Developing concentration risk regulation: discussion results
Following the discussion of the reform of the regulation of credit concentration risks with market participants, the Bank of Russia has finalised certain provisions of the concept.
In particular, the regulator has made the following changes to its original version:
– The decreased risk weight of 50% for state-owned companies with revenues of more than 2% of GDP applied when calculating concentration ratios will remain in effect for another year – until 1 January 2029. By that time, the concentration limit for such companies will be the N30 ratio, which will be calculated by systemically important banks.
– The criteria for the operational independence of companies for identifying a group of related borrowers (GRB) have been adjusted. In particular, the requirements for the composition of the board of directors have been eased. Furthermore, if the mutual financial obligations of companies in one GRB are minor, the companies will be considered operationally independent.
– The approach to determining which subsidiaries and dependent companies of a bank may be excluded from the calculation of the maximum risk ratio for related parties (N25) has been specified. Financial subsidiaries that provide insignificant financing for bank owners’ business will be excluded.
The Bank of Russia will continue to introduce regulation aimed at decreasing concentration risks. It is expected that some changes (for example, the gradual introduction of the calculation of concentration per securities issuer under a reverse repo agreement, the inclusion of claims for accrued income on loans in the calculation, criteria for operational independence) will be implemented as early as in 2025.