Financial Markets: Increasing Complexity, Maintaining Stability

3–5 July 2019, ST. PETERSBURG

    Nabiullina says bank equity requirements currently applied by Russia’s Eurasian Economic Community partners are already higher

    The Bank of Russia is planning to increase the future requirement for the minimum amount of funds (equity) to be held by federal banks to RUB 1 billion, Elvira Nabiullina, Governor of the Bank of Russia, told the International Financial Congress on Thursday.

    “In respect of the other[non-regional — Interfax]banks, with the exception of systemically important ones, we call these federal banks, and it is proposed that the requirement for the minimum size of their own funds (equity) be increased to RUB 1 billion and, consequently, that international standards should be implemented”, she said.

    Nabiullina said that the minimum bank equity requirements imposed by Russia’s Eurasian Economic Community (EurAsEC) partners are currently higher than those existing in Russia today, and will remain higher in three EurAsEC countries after Russia increases its standard to RUB 1 billion.

    According to the Governor, the banks are likely to be afforded a transition period of up to two years, so that they can decide “how they see their future” (as regional or federal banks), and a similar period will be required to raise the minimum equity.

    Ms. Nabiullina also spoke about stress tests for banks, which will be linked to the requirements and actions to be taken with respect to lending organizations whose assets exceed RUB 500 billion.

    “Stress tests will no longer be a purely monitoring exercise, as the requirements for banks will depend on their results. Preventive interventions, i.e. in the absence of actual violations of prudential standards, but where there are potential risks of future violations, will first be applied to the largest banks, whose assets exceed RUB 500 billion”, Ms. Nabiullina said.

    The regulator will also consider the results of stress tests when evaluating potential bank mergers.

    “It is expected that the results of bank stress tests will also be taken into consideration when assessing potential bank mergers, approving financial rehabilitation plans, or taking other key decisions of a supervisory nature”, Ms. Nabiullina said.

    Only basic requirements have been included in bank stress tests so far, she added. “But we are working on refining the parameters of stress scenarios and the requirements to be met by stress tests, whose results will be increasingly taken into account when taking supervisory decisions”, she said.

    Source: (Russian)