Bank of Russia adjusts foreign exchange risk regulation

The regulator introduces a new limit on balance-sheet OCPs (accounting for 50% of the equity) and the criteria of fictitious and unreliable hedging of the foreign exchange risk. These measures aim to better balance the currency structure of credit institutions’ assets and liabilities and rule out the understatement of the foreign exchange risk.

The Bank of Russia has revised the OCP calculation procedure. Now, it is closer to intrabank economic approaches and takes into account the actual effect of the foreign exchange risk on the financial result under IFRS. This will help credit institutions manage OCPs to comply with the limits.

Additionally, the Bank of Russia has adjusted the rules under which non-compliance with OCP limits is recognised as a violation. The new approach will allow credit institutions more time to cover the positions that have been opened in emergency situations owing to external reasons.

Banks will be obliged to apply the new approaches from 1 July 2024 (the provisions on the quality of hedging transactions are to be complied with from 1 October 2024).