The Central Bank has determined benefits for banks when lending to projects of technological sovereignty

The Central Bank revealed under what conditions banks will be able to use risk reduction coefficients when calculating capital if they lend to projects to achieve Russia’s technological sovereignty. Alexey Chagovets, Head of the Center for Strategic Analysis of the Department of Banking Regulation and Analytics of the Central Bank, spoke about this at a meeting of the Association of Russian Banks with the regulator, Vedomosti correspondent reports.

Banks should be able to save regulatory capital by lending to projects to transform the economy, Chagovets said. According to the calculations of the Central Bank, the savings can in some cases reach up to 10% of the total capital. At the end of 2022, its size amounted to 13.3 trillion rubles. Chagovets believes that the reduction in capital requirements is significant: it will be possible to “drop” up to 70% of the standard risk weight of the amount of credit risk.

Now standard regulation implies that when calculating capital adequacy, the bank divides all assets into five risk groups, each group is subject to its own adjustment factor – from 0 to 1.5. Banks with a universal license that will participate in lending to the transformation of the economy, when calculating the amount of credit risk, will have the opportunity to adjust it by a reduction factor, Chagovets explained the principle of the mechanism.

The size of the coefficient will depend on two parameters: the credit quality of the project and its significance based on government criteria. The Cabinet of Ministers approved these criteria on April 15, dividing projects by priority into the first and second groups. To determine the credit quality, the project will need to be assigned to one of two such groups. Within each group there will be three categories of credit quality – basic, high and maximum, follows from the presentation of Chagovets. According to this system, the minimum reduction coefficients in calculating the amount of credit risk will be for projects of the first group. In the basic, high and maximum categories, they will be 0.7/0.5/0.3x, for projects in the second group – 0.9/0.7/0.5x, respectively (the default coefficient is one).

In order to use base category ratios (0.7-0.9x), the borrower’s credit rating is not required, Chagovets said. It will be sufficient for the loan to be assigned to the first or second priority group. Either the creditworthiness of the borrower is assessed as sufficient or high by those banks that can do this on the basis of internal ratings: now the so-called advanced IRR approach is used SberbankRaiffeisenbank and Alfa Bank. The project status of the financing factory is also suitable. VEBsaid Chagovets.

To classify the project in the high and maximum quality categories, the Central Bank wants to introduce more stringent requirements. These should be high-quality borrowers whose credit quality has been verified by an independent appraisal. For a high category (0.5-0.7x), a national scale level rating of at least ru.BBB- is required. For the maximum (0.3-0.5x), ratings from two agencies not lower than A- will be required.

Easing requirements for certain categories of borrowers in theory can create risks, said Chagovets. But in order to limit them, the Central Bank provided for a number of mechanisms, including limits. Firstly, the most significant benefits will be received by the most reliable projects, and secondly, the amount of the bank’s total savings will be limited by a limit that will be determined individually. Its value will be calculated as the ratio of the smaller of the two values: 5% or 10% of the capital or the average profit for three years. The limiter is needed so that the bank can quickly restore capital from its own resources in the event of unforeseen losses, Chagovets explained.

Also, banks that do not comply with the requirements for capital allowances, even taking into account the temporary schedule for their recovery, as well as those undergoing a financial recovery procedure, will not be able to count on concessions. But most banks with a universal license use this regulation, Chagovets said.

The Central Bank expects that in May the draft instruction will be finally agreed and by the end of the first half of the year it will be sent for state registration to the Ministry of Justice.

Chagovets called the future changes “not quite the usual step of the regulator.” According to him, the Central Bank believes that by supporting such projects and providing incentives, taking into account all restrictions, the regulator reduces long-term risks for the banking system. The stronger and more sovereign the economy, the more reliable banks will feel, he concluded.

The Central Bank expects that the changes will encourage banks to lend to technological sovereignty projects and provide priority financing for such projects. And the combination with sectoral support measures that the government will administer will create an additional impetus for the most important areas for the country.

The idea of ​​a taxonomy for projects of import substitution and technological sovereignty, along with the introduction of a risk-sensitive approach for banks, was announced by the Central Bank in a report on the development of banking regulation and supervision during the period of economic restructuring. The amount of risk will depend on the significance of the project, while only profitable banks will be able to use lower risk ratios. In total, stimulating measures can help create a loan portfolio in the amount of 5–10 trillion rubles, including 1–2 trillion rubles. in the first year after the launch of the mechanism. This assessment was given at VEB, which, together with the Ministry of Economy and the Central Bank, participated in the preparation of the taxonomy.