Bank of Russia makes several decisions on banking regulation
1. The Bank of Russia has decided to adjust the schedule for setting the national countercyclical buffer for banks’ capital adequacy ratio (CCyB).
The CCyB has been set at 0.25% and 0.5% of risk-weighted assets, with effect from 1 February and 1 July 2025, respectively.
After the Bank of Russia decided in August 2024 to set the CCyB at 0.25% of risk-weighted assets from 1 July 2025, corporate lending continued to grow considerably faster than expected. Since the beginning of the year, outstanding corporate loans have increased by 14.5%, with 6.4% being gained in 2024 Q3 alone. October saw corporate lending grow by another 2.2%.
It is worth noting that banks have been actively building the CCyB for consumer and mortgage loans (₽1.1 trillion as of 1 October), whose growth has slowed down. As for rapidly growing corporate loans, no capital buffer against systemic risks has been created so far. In the banking sector, the N1.0 capital adequacy ratio decreased from 13.3% at the beginning of the year to 12.1% as of 1 October 2024.
Overheating in credit markets makes it necessary for banks to accumulate capital buffers against systemic risks faster. The increase in the CCyB will help ensure stronger resilience of banks and more balanced growth in lending to the economy. The timeline for further raising the countercyclical buffer to the target of 1% of risk-weighted assets will be revised in 2025.
2. The Bank of Russia will prepare regulatory amendments to limit credit risks of large corporates.
Large corporates, whose demand for loans is less sensitive to interest rate rises, account for more than 50% of the growth in the corporate lending portfolio in 2024. This situation may result in increases in large corporate debt overhangs and bank credit exposures.
To improve banks’ resilience to these risks, the regulator intends to amend macroprudential regulation to be able to set risk-weight add-ons for banks’ credit claims on heavily indebted large corporates. In addition, the regulator plans to raise the minimum risk weight on large corporate loans for banks applying the internal ratings-based approach. These steps are scheduled for 2025 H1.
3. The Bank of Russia intends to temporarily expand the scope of use of the irrevocable credit line (ICL) by systemically important banks to ensure their compliance with the liquidity coverage ratio (LCR).
The Bank of Russia will adjust the methodology for calculating maximum ICL limits for banks to bridge their liquidity gaps to be compliant with the LCR. The adjusted calculation of the above limit will help banks increase their ICL borrowings to ensure the LCR compliance until 1 July 2025. Without ICL liquidity injections, banks’ LCRs must be above 50% until 1 January 2025 and above 60% from 1 January to 1 July 2025.
The wider scope of the ICL use for the LCR compliance purposes is aimed at curbing the impact of this ratio on bank pricing.
No changes have been made in other ICL parameters, i.e. the fee calculation procedure and the variable rates of this fee (press release, dated 15 December 2023) and the earlier issued procedure for exiting from the LCR easing (press release, dated 23 November 2023). The ICL limit calculation methodology will be communicated to banks later.
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