Bank of Russia’s measures to support financial sector amid elevated volatility

Given the elevated volatility in financial market and in addition to the earlier published decisions¹, the Bank of Russia implements the following measures:

1. To expand the capabilities of systemically important credit institutions to manage their liquidity, the Bank of Russia eases the liquidity coverage ratio N26 (N27) applicable to these institutions. The Bank of Russia will not apply sanctions against systemically important credit institutions if they show a drop in the actual value of the above ratio resulted from both actual outflows of funds and depreciation of highly liquid assets, as well as from limited opportunities to prolong fund raising agreements for longer than 30 calendar days with a simultaneous repayment of long-term obligations (liabilities) taken before. The measure is effective until 31 December 2022. 

2. To expand the capabilities of brokers to manage their liquidity, the Bank of Russia will not apply sanctions against brokers if they violate the liquidity coverage ratio. The measure is effective until 31 December 2022.

3. To facilitate adaptation of insurance companies to the elevated market volatility, they will be permitted to fix the exchange rates of foreign currencies as of 18 February 2022 for calculating their required ratios (earlier, the similar measure was introduced for credit institutions). When using the foreign exchange rates and prices for financial instruments as of 18 February 2022, insurance companies will be able to apply the values of zero coupon yield curve fixed as of 18 February 2022. The measure is effective until 31 December 2022.

4. To ensure better flexibility of the creditors’ customer relationship, based on its right stipulated in Part 11, Article 6 of Federal Law No. 353-FZ, dated 21 December 2013, ‘On Consumer Loans’, the Bank of Russia temporarily lifts the restriction on the effective interest rates of consumer loans when the creditor enters into a consumer loan agreement. Notably, the effective matrix of macroprudential add-ons for new unsecured consumer loans remains unchanged (higher add-ons for high EIRs) and will encourage banks to raise retail loan rates to a limited extent. The said decision will come into effect upon the official publication of Bank of Russia regulation. The measure is effective until 30 June 2022.

5. To improve the capabilities of banks to manage liquidity, at an extraordinary meeting of the Board of Directors of the Deposit Insurance Agency, the Bank of Russia initiates an issue on reducing the additional and higher additional rates of insurance contributions payable by banks participating in the deposit insurance system, for deposits in rubles and foreign currency, including those confirmed by savings certificates, made in 2022 Q1 and Q2.

6. To pursue the countercyclical macroprudential policy amid the elevated volatility in the foreign exchange market, starting from 28 February 2022, the Bank of Russia releases the accumulated macroprudential capital buffer for banks’ claims in foreign currency on legal entities (158 billion rubles as of 1 February 2022). An addition, the Bank of Russia cancels the add-ons to risk weights for new banks’ claims in foreign currency on legal entities. This measure has no time limit.

Please note that given the current elevated volatility and implementation of the financial stability measures it is advisable that credit institutions should consider an issue on postponing the payment of dividends and bonuses to management. It becomes mandatory if a bank intends to use the buffers to capital adequacy ratios (capital conservation buffer and systemic importance buffer).

¹ Measures to support financial market

Measures to stabilise situation in financial market.

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