On introduction of exposure concentration ratio due to the implementation of the Basel Committee's Supervisory Framework for Measuring and Controlling Large Exposures starting from 01.01.2019
Starting from 01.01.2019, the Bank of Russia will be implementing the provisions of the Supervisory Framework for Measuring and Controlling Large Exposures, published by the Basel Committee on Banking Supervision (BCBS) in April 2014 (hereinafter, the Standard), in its banking regulation activity.
It is planned to implement the provisions for systemically important credit institutions.
Following the assessment of the potential impact from the Standard implementation, the Bank of Russia decided to introduce its provisions gradually. During Stage 1 (at least during 2019), the Bank of Russia will set the ratio of maximum concentration of exposure per borrower or group of related borrowers (PKC6.1), which systemically important banks will calculate from 01.01.2019 and report using the reporting Form 0409118 ‘Information on Credit Exposure Concentration’ provided in Bank of Russia Ordinance No.
During Stage 2, based on the results of monitoring of the above indicator, the Bank of Russia will take a decision regarding the terms and specifics for setting PKC6.1 as a required exposure concentration ratio.
PKC6.1 calculation specifics will include the following:
1. All the bank’s exposures to the borrower (a group of related borrowers), contingent credit obligations, and derivatives are included in the calculation not weighed by risk level (minus formed provisions for possible losses).
2. PKC6.1 is calculated based on Tier 1 capital.
3. Claims on the qualified central counterparty (hereinafter, QCCP), which conforms to the requirements of code 8846 in accordance with Appendix 1 to Bank of Russia Instruction No.
4. The credit exposure calculation does not include claims on central banks and governments (including the Government of the Russian Federation), constituent entities and municipalities of the Russian Federation, and claims guaranteed or secured with debt securities issued by the above counterparties.
5. Credit exposure reduction.
The amount of claim subject to credit exposure may be reduced by the amount of a guarantee/surety obtained from such persons or a collateral in the form of securities of such issuers that correspond to the requirements for asset groups
At the same time, if the bank reduces the credit exposure to the counterparty due to the availability of the said security, it will be obliged to calculate a credit exposure to the guarantor (collateral provider/issuer of the debt security). The guarantor exposure amount is determined by the amount of the accepted liabilities, by which the counterparty exposure has been reduced.
Besides, the claim amount may be reduced by the amount of security in the form of a guarantee deposit, pledge of debt securities of the lender, and gold bullions in the bank’s vault.
6. To determine the credit exposure for off-balance liabilities, each contingent liability is brought to its credit equivalent by multiplying it using the ratios established in Appendix 2 to Instruction
If the bank reduces the credit exposure to the counterparty under a contingent liability due to the availability of security, it will be obliged to calculate a credit exposure to the guarantor (collateral provider/issuer of the debt security). The guarantor exposure amount is the amount by which the counterparty exposure has been reduced.
The full text of the Standard in English is available on the BCBS website at http://www.bis.org/publ/bcbs246.pdf.
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