On introducing high risk ratios to calculate bank capital adequacy ratio for foreign exchange transactions

The Bank of Russia releases, with a view to ensuring that additional capital is provided for the banking sector’s forex risks, a draft Bank of Russia Ordinance ‘On Amending Bank of Russia Instruction No.139-I, Dated 3 December 2012, ‘On Banks’ Required Ratios’ (hereinafter referred to as the draft). The draft regulation provides for high risk ratios, to be introduced from 1 May 2016, for loans to legal entities and securities deals in foreign currency (110%, 130% and 150%, depending on the type of a transaction / investment object / the quality of a securities depository) for the purposes of banks’ capital adequacy calculation.

According to the draft, the high risk ratios would not be applied to loans extended to financial authorities and credit institutions; neither will it be applied to their issued debt securities.

Outside the scope of the high ratios will also be rights of claims from borrower legal entities (including investment into their debt securities) which have export revenues in the same foreign currency as the right of claim or which are in an international reserve currency and sufficient for borrowers’ forex debt servicing. Additionally, the high risk ratios would not be applied to exposure (including investment in debt securities) which are classed as Group I — III assets.

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01.04.2016 00.00.00