The Bank of Russia has announced adjustments to the market risk regulation for credit institutions. The primary change involves the exclusion of derivatives hedging bank balance sheet risks, such as interest rate risk, from the market risk assessment. This adjustment aims to alleviate pressure on banks' capital and promote the development of risk hedging practices.
Concurrently, the regulator is tightening requirements for the quality of hedging derivatives to prevent underestimation of market risk. Similar rules and criteria are already in place for calculating open currency positions.
These regulatory changes were discussed with the banking community during a regulatory impact assessment in 2023. Feedback from these discussions was incorporated into the final regulation adjustments.
Banks will start applying new approaches to market risk assessment from July 1, 2024. However, the rules concerning the quality of hedging derivatives will become mandatory starting October 1, 2024.