On countercyclical buffer to capital adequacy ratio

The Bank of Russia Board of Directors decided to retain the countercyclical capital buffer (CCB) rate for Russian credit institutions at zero per cent of risk weighted assets.

Lending activity in the economy remains moderate. In the banking sector, redistribution of loans is being observed towards ruble-denominated loans, mainly driven by bank revaluating foreign currency loan risks and the reduction of bank liabilities in foreign currency. As of 1 March 2017, receivables in the portfolio of ruble loans to non-financial organisations and households grew by 0.4% since the start of the year (12-month growth stood at 1.9%). Adjusted for exchange rate revaluation, the portfolio of foreign currency loans to non-financial organisations and households shrank by 3.8% over the same period (12-month shrinkage stood at 14.9%). The negative values of credit gap assessments (the credit-to-GDP gap is defined as the difference between the actual ratio of loans adjusted to FX revaluation to GDP and its long-term trend) and the dynamics of other indicators taken into account while deciding on the rate of the countercyclical buffer testify to the retention of the declining phase of the credit cycle. Given the situation, the Bank of Russia deems it expedient to leave the countercyclical capital buffer unchanged at zero per cent.

The Bank of Russia considers changes to the CCB rate on a quarterly basis. Should the Bank of Russia Board of Directors decide to set the CCB rate at above zero per cent of risk weighted assets, the appropriate requirements will become effective no sooner than six months and no later than 12 months from the decision announcement. This will allow the banking sector to timely plan changes to its capital, including the policy of dividends and compensations.

The countercyclical capital buffer has been introduced by Bank of Russia regulations since 1 January 2016 as part of reporting for the first quarter of 2016 in compliance with Basel III approaches stipulated by Article 67 of Federal Law No. 86-FZ, dated 10 July 2002, ‘On the Central Bank of the Russian Federation (Bank of Russia)’ and Bank of Russia Ordinance No. 3855-U, dated 30 November 2015, ‘On Amending Bank of Russia Instruction No. 139-I, Dated 3 December 2012, ‘On Banks’ Required Ratios’.

The Bank of Russia Board of Directors will hold its next CCB rate review meeting in June 2017.

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