New definition of credit risk on financial derivatives proposed by the Bank of Russia

Source: Central Bank of the Russian Federation in English

The new improved methodology for the assessment of credit risk on financial derivatives is presented in the draft Regulation. The methodology will be used for the calculation of required reserves by banks with a universal licence, except those employing the IRB-approach to calculate counterparty credit risk.
This methodology applies to all exchange-traded and OTC derivatives of banks with a universal licence. The calculation of the risk position in based on the following parameters of derivatives: type of underlying asset, presence / absence of netting, margin or collateral. This improves risk sensitivity due to a better fine-tuning.
Given the Bank of Russia’s statement that new and complicated BCBS standards do not apply to banks with a basic licence as part of the implementation of the concept on proportional regulation, these banks will continue to apply the existing methodology for assessing credit risk on derivatives.
The Bank of Russia plans to introduce the new methodology for the calculation of counterparty credit risk on derivatives starting 1 January 2020.
29 December 2018

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Bank of Russia Bulletin released (28.12.2018)

Source: Central Bank of the Russian Federation in English

Information Notice
Bank of Russia Bulletin released
Bank of Russia Bulletin No. 97 (2051) of 28 December 2018 has been released.
The Credit Institutions section presents a review of the key indicators of the domestic foreign cash market in October 2018.
The Bulletin publishes the following Bank of Russia orders:
No. OD-3321, dated 26.12.2018, on terminating the activity of provisional administration to manage the Moscow-based credit institution PIR Bank LLC;
No. OD-3322, dated 26.12.2018, on terminating the activity of provisional administration to manage the Volgograd-based credit institution Bank COR;
No. OD-3323, dated 26.12.2018, on amending the Appendix to Bank of Russia Order No. OD-2901, dated 7 November 2018.
The Non-bank Financial Institutions section informs about the results of the disposal of assets of JSC NPF Zashchita Budushchego and JSC NPF Uchastiye.
The issue publishes information notices of the Bank of Russia.
The Official Documents section publishes the following materials:
Bank of Russia Ordinance No. 4930-U, dated 11 October 2018, ‘On Amending Bank of Russia Regulation No. 383-P, Dated 19 June 2012, ‘On Funds Transfer Rules’ (becomes effective 10 days after its official publication except for the provisions for which other effective periods are established; posted on the Bank of Russia website on 26.12.2018);
Bank of Russia Ordinance No. 4979-U, dated 27 November 2018, ‘On the Requirements for Securities with Which Banks with a Basic Licence Are Entitled to Conduct Operations and Transactions When Operating in the Securities Market’ (becomes effective 10 days after its official publication; posted on the Bank of Russia website on 26.12.2018);
Bank of Russia Standard STO BR NPS-1.2-2018 ‘Financial Messages in the NPS. Exchange of Financial Messages Within the NPS during Funds Transfer Operations at the Payee’s Initiative. Communications Models’.

28 December 2018
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Bank of Russia to start publishing data on price expectations of businesses

Source: Central Bank of the Russian Federation in English

The Bank of Russia starts monthly publication of data on price expectations of businesses. The Bank of Russia gathers and analyses this information to get an insight into how real sector companies estimate future price movements, what their reasons behind such estimates are, and whether they believe that inflation will stabilise around 4%. The regulator uses the dynamics of price expectations of businesses to prepare its key rate decisions.
The Bank of Russia, just like other central banks, uses the data on price expectations of businesses, accumulated over many years, to get a better understanding of inflationary processes and inflation specifics as applicable to the Russian economy, as well as to prepare its forecasts.
Earlier, the information on price expectations of businesses was published in the Monetary Policy Report. From now on, this information will be published on a regular basis in the section Monetary Policy / Economic and Financial Market Outlook / Inflation Expectations.
The data is obtained from monthly surveys of companies conducted by the Bank of Russia for over 18 years. Currently, more than 11,000 companies participate in the surveys representing such sectors as manufacturing, agriculture, construction, transportation and storage, wholesale and retail trade. Surveys are conducted in all Russian constituents and cover small, medium and large (including systemically important) regional enterprises.
To assess price expectations, the regulator uses companies’ responses to the question ‘How will finished product prices change over next 3 months?’ (Possible answers are ‘increase’, ‘remain unchanged’ and ‘decrease’). Based on the received information, the Bank of Russia calculates the balance of replies as the difference between the shares of the ‘increase’ and ‘decrease’ replies in per cent to the total of shares of precise replies.
Due to the fact that company surveys contain quite a broad range of information, which allows the regulator to promptly receive alternative assessments of the country’s economic and investment activity, the contents of the published survey data will be expanded in the near future.
28 December 2018

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Imports of Services by Region of the Russian Federation

Source: Central Bank of the Russian Federation in English

According to macroeconomic statistics, in 2016 Q4 – 2017 Q1, the amount of external debt repayments by non-financial organisations, including principal and interest, totals $23 billion and $20.7 billion respectively.
As it is the case, the peak of repayments occurs in December according to macroeconomic statistics ($13.4 billion), with the bigger portion of these repayments likely to be rolled over. This December, the amount of repayments is scheduled to be down by 24% year on year.
Additionally, the schedule for the period under consideration shows that considerable external debt repayments are due in March 2017 ($12.8 billion). According to Bank of Russia estimates, the main portion of these payments is made up of the liabilities of 30 Russian companies – largest borrowers in external markets. Out of this amount, roughly $4.8 billion represent intragroup payments, and $3.8 billion – scheduled Eurobond repayments by several large non-financial organisations which have sufficient foreign currency liquidity to service their debt obligations.
Overall, actual payments may reach $21.6 billion in 2016 Q4 and $15.2 billion in 2017 Q1. The rest of this amount represents intragroup payments (these are established for 30 Russian companies – largest borrowers in external markets), which, as a rule, are likely to be rolled over and restructured.
According to the Bank of Russia’s survey of top companies, the share of intragroup borrowings in the total amount of external debt repayments by large borrowers had the following readings across 2016: 0.2% in October, 17% in November, 29% in December; and across 2017: 24% in January, 23% in February, and 40% in March. As adjusted by intragroup funding, the repayments by the largest companies will total $6.3 billion in 2016 Q4 and $9.8 billion in 2017 Q1.
Schedule of due external debt repayments by 30 top borrowers – non-financial organisations in 2016 Q4 – 2017 Q1*
Indicators
2016
2017
Oct
Nov
Dec
Jan
Feb
March
Total due payments, $ million
1,687
3,194
2,749
1,285
2,064
11,958
Net payments, $ million
1,684
2,638
1,938
975
1,599
7,198
Share of intragroup funding
0%
17%
29%
24%
23%
40%
* Q4 readings are adjusted by the up-dated information from transaction specifications issued by authorised banks when executing foreign currency transactions between residents and non-residents.
19 October 2016

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Exports of Services by Region of the Russian Federation

Source: Central Bank of the Russian Federation in English

According to macroeconomic statistics, in 2016 Q4 – 2017 Q1, the amount of external debt repayments by non-financial organisations, including principal and interest, totals $23 billion and $20.7 billion respectively.
As it is the case, the peak of repayments occurs in December according to macroeconomic statistics ($13.4 billion), with the bigger portion of these repayments likely to be rolled over. This December, the amount of repayments is scheduled to be down by 24% year on year.
Additionally, the schedule for the period under consideration shows that considerable external debt repayments are due in March 2017 ($12.8 billion). According to Bank of Russia estimates, the main portion of these payments is made up of the liabilities of 30 Russian companies – largest borrowers in external markets. Out of this amount, roughly $4.8 billion represent intragroup payments, and $3.8 billion – scheduled Eurobond repayments by several large non-financial organisations which have sufficient foreign currency liquidity to service their debt obligations.
Overall, actual payments may reach $21.6 billion in 2016 Q4 and $15.2 billion in 2017 Q1. The rest of this amount represents intragroup payments (these are established for 30 Russian companies – largest borrowers in external markets), which, as a rule, are likely to be rolled over and restructured.
According to the Bank of Russia’s survey of top companies, the share of intragroup borrowings in the total amount of external debt repayments by large borrowers had the following readings across 2016: 0.2% in October, 17% in November, 29% in December; and across 2017: 24% in January, 23% in February, and 40% in March. As adjusted by intragroup funding, the repayments by the largest companies will total $6.3 billion in 2016 Q4 and $9.8 billion in 2017 Q1.
Schedule of due external debt repayments by 30 top borrowers – non-financial organisations in 2016 Q4 – 2017 Q1*
Indicators
2016
2017
Oct
Nov
Dec
Jan
Feb
March
Total due payments, $ million
1,687
3,194
2,749
1,285
2,064
11,958
Net payments, $ million
1,684
2,638
1,938
975
1,599
7,198
Share of intragroup funding
0%
17%
29%
24%
23%
40%
* Q4 readings are adjusted by the up-dated information from transaction specifications issued by authorised banks when executing foreign currency transactions between residents and non-residents.
19 October 2016

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On publication of a new statistical dataset (29.12.2018)

Source: Central Bank of the Russian Federation in English

Information Notice
On publication of a new statistical dataset
For the purpose of broadening informational support to users, the Bank of Russia launches publication of statistical data on the dynamics of international trade of the Russian Federation in services in regional breakdown.
The new publication contains data on volume of exports and imports of services within main service categories broken down by regions of the Russian Federation for Q1 and Q2 of 2018. The data are used as a basis for monitoring realization of a prioritized national project aimed at development of international cooperation and exports, enhancing the analytic capabilities for measuring development of non-commodity trade and regions` input in the Russian Federation`s international trade in services.
The materials are posted on the official website of the Bank of Russia on the Internet within Statistics/Macroeconomic Financial Statistics/External Sector Statistics subdirectory under External Trade in Services and to be updated on the dates set out in the Official Statistics Release Calendar.

29 December 2018
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Results of sectoral assessment of risks of the legalisation (laundering) of criminally obtained incomes and the financing of terrorism (28.12.2018)

Source: Central Bank of the Russian Federation in English

Information Notice
Results of sectoral assessment of risks of the legalisation (laundering) of criminally obtained incomes and the financing of terrorism
Acting in line with the international standards on anti-money laundering and countering financing of terrorism and financing the proliferation of weapons of mass destruction of the Financial Action Task Force on Money Laundering (FATF), the Bank of Russia held the first sectoral risk assessment in the sphere money laundering and financing of terrorism (ML/FT).
The assessment helped to reach the common understanding of ML/FT risks specific for supervised entities and to make conclusions on measures needed to bring to the minimum the chances for credit institutions and non-bank financial institutions to be engaged in illegal activities.
In the course of the assessment, the Central Bank of the Russian Federation took into account the results of the national assessment of ML/FT risks and regional peculiarities identified by Bank of Russia regional branches. Based on the assessment outcomes, all types of supervised organisations have been assigned a specific level of ML/FT risk on a four-level scale (high, elevated, moderate, low).
The Bank of Russia uses the results of sectoral assessment of ML/FT risks for supervisory purposes. Drawing on the results of the sectoral assessment of ML/FT risks, the Bank of Russia prioritises the following types of supervised entities: credit institutions, professional securities market participants, insurance companies, consumer credit cooperatives, and pawn shops.
Sectoral ML/FT risk assessment will be updated on a regular basis.
As set forth by FATF recommendations, countries shall apply measures for the identification and assessment of ML/FT risks and, based on this assessment, engage in risk-based approach ensuring the compliance of AML/FT measures with risks identified. This approach shall assist in the efficient resource allocation, including the resources of supervisory bodies, for AML/FT purposes.

28 December 2018
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Assessment of Sberbank payment system (28.12.2018)

Source: Central Bank of the Russian Federation in English

Information Notice
Assessment of Sberbank payment system
From 27 April through 11 October 2018, the Bank of Russia undertook, in accordance with the Russian legislation, its regular assessment of a socially important payment system Sberbank for its compliance with the international standard ‘Principles for Financial Market Infrastructures’ (the Principles for FMIs). The Bank of Russia recommends that national important payment system operators be compliant with the standard developed by the Committee on Payments and Market Infrastructures of the Bank for International Settlements jointly with International Organization of Securities Commissions.
The assessment confirms the Bank of Russia’s previous assessment findings that the payment system is highly compliant with the Principles for FMIs. Rankings of four principles were upgraded to the highest possible levels.

28 December 2018
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Calendar of key monetary policy events for 2019 updated (28.12.2018)

Source: Central Bank of the Russian Federation in English

Information Notice
Calendar of key monetary policy events for 2019 updated
The Bank of Russia has updated the calendar of key monetary policy events for 2019.
Starting from the Board of Directors’ meeting on 22 March 2019, the Bank of Russia will include a table with the updated macroeconomic forecast in its key rate press release following pivotal Board of Directors’ meetings and publish the Monetary Policy Report within one week (on the sixth business day) after each pivotal meeting.

28 December 2018
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JSC Raiffeisenbank authorised to use internal ratings-based approach (28.12.2018)

Source: Central Bank of the Russian Federation in English

Information Notice
JSC Raiffeisenbank authorised to use internal ratings-based approach

The Bank of Russia has permitted JSC Raiffeisenbank to use banking methodologies to manage credit risk and quantitative models to estimate credit risk using the internal ratings-based (IRB) approach to calculate capital adequacy ratios.
It took two years for Bank of Russia experts to validate the rating framework used by JSC Raiffeisenbank, including the time required to improve the methodologies in according with the regulator’s recommendations.
The authorisation will come into force on 1 February 2019 after the Supervisory Board of JSC Raiffeisenbank has adopted the decision to use these methodologies. Initially, the bank will have the right to use these models to implement the IRB approach with regard to credit claims on legal entities included in the bank’s application. In line with the Phased-out Transition Plan, JSC Raiffeisenbank will transfer the remaining credit claim segments to the IRB approach. These will not include assets, whose credit exposure JSC Raiffeisenbank will continue to calculate using the simplified standardised approach.
In late 2018, another systemically important credit institution filed an application to implement this approach. It is expected that the validation of its IRB methodologies and models will be conducted in the upcoming 18 months. This process points to a high degree of readiness among Russian systemically important banks to adopt advanced and modern risk assessment models. This will in turn allow the Bank of Russia to consistently introduce internationally accepted standards for capital adequacy assessment elaborated by the Basel Committee on Banking Supervision, as set out in Basel II Accord, into the Russian regulatory environment.

28 December 2018
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