Assets will be counted chopped – Newspaper Kommersant No. 7 (7452) dated 01/17/2023

In 2023, banks will be able to convert assets blocked abroad into rubles. This is planned to be done as part of relief for credit institutions, in particular, to provide installment plans for gradually bringing the level of reserves to 100%. Since the assets will be valued in rubles, their value will be protected from exchange rate fluctuations, which will reduce pressure on capital and profits.

The Bank of Russia has published a draft instruction that should change the reflection of bank assets blocked due to sanctions in RAS financial statements. According to the Central Bank, the prospects for the return of such assets “seem to be extremely low, despite the fact that, from a legal point of view, they have not yet been confiscated.” However, the regulator considered the one-time creation of 100% reserves for blocked assets as an “overly conservative approach”, and therefore allowed banks to accrue reserves for them (from 0% to 100%) for ten years (until December 31, 2032). A one-time accrual of reserves in the amount of 100%, according to the Central Bank, would lead to “a significant reduction in the profits and capital of individual banks, and a decrease in the lending potential.”

Since the end of February 2022, sanctions against the Russian banking sector have been regularly expanded. During this time, a number of large credit institutions fell under EU and US sanctions, including the entire list of systemically important ones with the exception of three – Raiffeisenbank, Unicredit Bank and Tinkoff Bank. In the case of blocking sanctions, assets were frozen in the territory of foreign jurisdictions.

The Central Bank did not publicly disclose the total volume of such assets. However, based on the previous statements of the heads of banks, it is known that VTB has blocked assets in the amount of about 600 billion rubles, and FC Otkritie has 4 billion rubles. In addition, according to the statistics of the Central Bank, the balances of Russian credit institutions on correspondent accounts with banks abroad at the beginning of February 2022 amounted to 1.85 trillion rubles. The main part – over 1 trillion rubles – was placed in US banks, in second place – Great Britain (257 billion rubles), in third – Germany (129 billion rubles).

Now in the banking sector, the average reserve level is less than 5% of the frozen assets, the Central Bank specified at the end of December. This reflects the situation “with the exception of a few banks, which already have significant reserves of blocked assets”. We can talk about Sberbank, whose head German Gref said at the WEF in September 2022 that the bank “virtually fully formed the reserves that were needed.”

If the bank uses installment reserves, then the value of assets under RAS will be fixed in rubles at the exchange rate in force on the date the instruction is entered. In it, the Central Bank introduces the term “non-reimbursable blocked assets”, that is, assets that have no alternative sources of return, notes Anna Timershina, FBK senior expert. Their value “will be taken into account in rubles and will not be subject to recalculation due to changes in the official exchange rate, which will make it possible to avoid a “paper” result from the exchange rate revaluation of such assets in the future,” she explains. As Yury Belikov, Managing Director of Expert RA, notes, in this way “there will be a constant, rather than a dynamically changing schedule for the formation of reserves.”

The document also “allows to exclude blocked assets and “impossible” obligations from the calculation of the open currency position (OCP)”, notes Mr. Belikov. Taking into account the impossibility of claiming blocked assets and repaying individual liabilities without the proposed measures, they could not be excluded from the calculation of the ORP and would have to be constantly compensated with something, because “it is absolutely not necessary for a bank to have the same amount of blocked assets and “hanging” liabilities”, the expert explains.

In general, Kirill Altukhov, a partner in the Kept audit services department, believes that the Central Bank introduced relief for three reasons: in order not to underestimate the tax base for income tax, not to reduce the dividend base, and, thirdly, “not to spoil the financial result for Russian banks”.

Olga Sherunkova