Banking regulation and supervision development: Bank of Russia’s report
The Bank of Russia has presented its strategic initiatives in banking regulation and supervision for the medium term. New external conditions are setting new ambitious tasks for a structural adaptation that the economy should cope with, including by implementing new regulatory approaches.
Among the priorities and tasks to be addressed, the regulator will:
- develop risk-sensitive incentive-based regulation for the banks financing priority projects of the Russian economy;
- enhance the quality of banks’ capital and stability and limit the risks of concentration of immobilised assets and investments in them;
- mitigate liquidity, interest rate, market and foreign exchange risks considering national specifics and lessons learnt from the crisis;
- limit balance sheet risks through long-term sources of financing to be formed by banks;
- reduce risks in retail lending for banks and borrowers; and
- improve approaches to supervisory evaluation.
Russia’s economy and financial system have passed the test for resilience in the situation of external pressure. During the acute phase of the crisis, the Bank of Russia had to grant an unprecedentedly large-scale package of temporary easing measures that it is now phasing out gradually. Additionally, certain vulnerabilities were identified in the banking sector, including new risks that the current regulation cannot limit adequately.
The Bank of Russia considers it necessary to develop the regulation in such a way that it could ensure the stability of financial institutions during stress periods without resorting to considerable regulatory easing and urgent (not planned in advance) state support measures.
As before, the regulator will rely on best international practices if they are efficient in Russian conditions.
Concepts of some of the above initiatives will be refined further and presented in relevant consultation papers. Some of the proposals have been presented for discussion at the initial stage, before a comprehensive concept has been elaborated. Certain development areas might be adjusted or remain uncovered based on the findings of the analysis or due to changed circumstances.
The document is to be updated and amended, including by adding links to consultation papers and other publications on relevant topics.