The Central Bank is going to clarify the criteria for classifying banks as systemically important credit institutions

The Bank of Russia is going to clarify the criteria according to which a bank can be classified as systemically important and introduce differentiated capital allowances, which are currently set at 1% for all. Experts point out that the criteria do not oblige the regulator to automatically classify a bank as systemically important even if all conditions are met.

The Bank of Russia is discussing the possibility of expanding the criteria for classifying banks as systemically important credit institutions (SICs), Deputy Chairman of the Central Bank Olga Polyakova said on September 28 at a forum in Sochi organized by the Association of Russian Banks. “These criteria will take into account the size of the bank’s client base and will provide us with the opportunity to set differentiated capital premiums,” she explained.

For all systemically important banks, a single capital buffer is prescribed in the amount of 1% of risk-weighted assets (reduced to zero until December 31, 2023), but for a number of credit institutions the level may be increased in the future. This, according to Ms. Polyakova, “will contribute… to equalizing competition.”

Managing Director for Validation of the Expert RA rating agency, Yuri Belikov, considers the regulator’s desire to fine-tune and clarify the criteria logical, since now they “lack depth and flexibility.” “It is most likely that, given its conservatism, the Central Bank will select additional criteria so as not to expand the list at the moment, but simply to provide itself with more flexible tools for arguing possible decisions in the future,” suggests Yuri Belikov.

Kommersant’s sources in a number of banks believe that there are no serious advantages from inclusion in the number of systemically important credit institutions. But for clients, according to the chairman of the board of Realist Bank, Vladimir Elmanin, the inclusion of the bank in the list of SZKOs means its more reliable position due to increased capital requirements and closer control by the regulator. “It is believed that the Central Bank will not immediately take away the license of a systemically important bank, but will try to sanitize it,” adds another Kommersant interlocutor in the market.

At the same time, experts clarify, the status of a SCZO leads to a significant increase in the regulatory burden on the bank: it results in a greater number of inspections, a larger amount of information is requested, not to mention an increased capital premium. As Mikhail Matovnikov, head of the Sberbank Financial Analytics Center, explained, the status of SZKO leads to an increase in capital requirements and the need to comply with Basel liquidity standards, and these are additional restrictions for the bank.

“If we talk about differentiated premiums for different banks, the details are important here: you can differentiate capital premiums in accordance with the riskiness of the business model, or based on other criteria – for example, on the size of the bank,” emphasizes Mr. Matovnikov. Accordingly, according to him, the results will be different: you can either increase the reliability of the system or reduce its efficiency.

Yuri Belikov considers the differentiation of bonuses for systemic significance and their direct dependence on the criteria of significance to be a “dubious measure.” According to him, often the larger and more significant the bank, the greater its competitive advantages and the more it loads capital, without having a shortage of funding and client demand, unlike small credit institutions. The largest have no reason to maintain excess capital adequacy, which could easily be used to meet increased premiums, the expert adds.

As market participants note, in the absence of specifics, it is difficult to talk about how the planned measures of the Central Bank will affect the banking sector. Valery Piven, head of the ACRA financial institutions ratings group, clarifies that among large banks there are already organizations that are close in importance to the industry to those included in the list of SZKOs. At the same time, the segment’s share “is so high that adding other banks to the list will not significantly change the situation.”

Maxim Builov