The Central Bank extended relaxations for banks directly related to sanctions

Against the backdrop of high profits of Russian banks, the Central Bank decided not to extend a number of relaxations introduced for them after the outbreak of hostilities in Ukraine and massive sanctions pressure on the financial system of the Russian Federation. But some measures will remain in place for another year. First of all, relaxations related to the assessment of the risks of military personnel, as well as those directly related to sanctions, will continue to apply. Disclosure of material information by financial institutions will also remain incomplete. This fact is especially upsetting to analysts who talk about the problem of transparency in banks.

The Central Bank announced the cancellation of some of the relaxations for Russian banks: “Credit organizations now have sufficient financial stability and high profitability. The measures played a protective and supportive role.” At the same time, the Central Bank clarified, “the integration into regulation of strategic decisions that take into account the impact of asset blocking… and current national specifics” will continue.

Thus, relaxations for large banks under the conditions of compliance with the short-term liquidity standard (SLR) are cancelled. To facilitate the transition, banks will open irrevocable lines of credit (ICL). The requirement to comply with the ratio taking into account credit lines at the level of 100% will apply from March 1, 2024. For systemically important banks, the non-application of measures in case of violation of the net stable funding standard (NSSF) ends.

In 2024, the Central Bank plans to resume collecting information on the state of risk and capital management systems of banks and banking groups, as well as conduct supervisory assessments of their quality.

The deferment for the formation of reserves for loans to small and medium-sized businesses and individuals overdue for more than 90 days will also cease to apply. “About 20 banks are now using the relaxation with a total effect on capital of less than 18 billion rubles; cancellation will not lead to their violation of regulations,” the Central Bank explained.

The measures, which are planned to remain in place until the end of January 2025, include risk assessments of military borrowers and their families. The right of banks not to disclose information sensitive to sanctions risk will also be extended: about the ownership structure, members of management bodies and other officials, significant conditions of the reorganization, and some information about the essential facts. Until the end of 2024, banks will be able to disclose financial statements with the exception of “sanctions risk-sensitive data.”

Until the end of 2024, credit institutions will still have the opportunity to early terminate obligations under subordinated instruments to persons from “unfriendly” countries when they are allocated together with the blocked assets of a special company. The ability to include in capital replacement subordinated bonds issued in place of similar ones on global markets has also been extended for a year. The installment plan for the formation of reserves for blocked assets will continue to apply.

According to the managing director of the Expert RA rating agency, Yuri Belikov, additional reserving in connection with the canceled relaxations will be small: “This will have significantly less pressure on the financial result than other factors, such as a slowdown in lending, an increase in funding costs and a decrease in the net interest margin at limited mobility of assets.” The cancellation of the relaxations will not have a significant impact, most of them are no longer actively used, agrees ACRA Managing Director Valery Piven. “Based on the regulator’s explanations, all canceled relaxations have a very limited impact on the profits and capital of banks,” says NKR Managing Director Mikhail Doronkin.

In January-September, banks have already earned 2.7 trillion rubles. net profit.

“Ideologically, the Central Bank cannot but cancel the easing, since this year banks will bring record profits, return on capital may exceed 25%,” explains independent expert Andrei Barkhota.

At the same time, experts are concerned about the extension of relaxations in information disclosure, which they do not consider justified. If in terms of owners and management bodies this can be explained by sanction risks, says Mr. Barhota, then in terms of regulatory reporting, the disclosure format, which involves “aggregation of a number of accounts, lack of detail for second-order accounts and similar veiling of not particularly sensitive information, is still not quite understandable.”

Ksenia Dementieva, Yulia Poslavskaya, Maxim Builov