IMF Reports on 2017 Article IV Consultation with Russian Federation
IMF published its staff report and selected issues report in the context of the 2017 Article IV consultation with the Russian Federation. Directors welcomed the steps taken to increase the resilience of the financial system, including an improved bank resolution mechanism. They encouraged the authorities to revamp the statutory bail-in legislation while keeping in mind financial stability implications. While the CBR-administered open bank resolution framework has some positive features, it is not yet consistent with international standards.
The staff report highlights that the banking sector’s performance has been improving over the past year, with banks’ deposit funding experiencing healthy growth and the banking system now in a structural liquidity surplus. Banks’ profitability is increasing—although it varies greatly across banks—on the back of higher net interest margins and lower provisioning on stabilized nonperforming loans, which after rising for two years have settled at about 9.5%. The Capital Adequacy Ratio remained stable overall and increased moderately in the past few months to nearly 13%, against a regulatory minimum of 8%, with a common equity tier 1 (CET1) ratio of 9.2% in relation to a phased-in Basel III capital requirement of 4.5%. The Central Bank of Russia (CBR) closed 110 credit institutions in 2016, compared to 101 in 2015, continuing to target mostly small banks that are weak and/or involved in dubious transactions, bringing the number of total credit institutions to 616, from 923 at the end of 2013. The authorities have taken actions to support financial stability.
The report reveals that the CBR has initiated some elements of an Asset Quality Review, through the newly created Risk Assessment Department, for the entire banking system, and the review is expected to be completed by the end of 2018. The Central Bank also tightened macro-prudential requirements to reduce dollarization by setting higher capital risk-weights for foreign exchange lending by banks to unhedged borrowers; strengthened stress testing by adjusting for potential misclassification of loans and linked the stress-test results to supervisory action; established a tiered supervisory framework for banks; and defined a capital surcharge for ten domestic systemically important banks. The banking system’s performance is improving and the authorities should continue with implementing last year’s FSAP recommendations. Further strengthening the effectiveness of the anti-money laundering and combating the financing of terrorism framework, including through measures related to politically exposed persons and entity transparency, will support the authorities’ efforts to address financial crimes related to tax evasion and corruption.
Related Links
Keywords: Europe, Russia, Banking, Basel III, Capital Adequacy, Resolution Framework, Article IV, IMF
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
US Agencies Extend Resolution Plan Deadline for Certain BanksRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
