On October 14, 2024, the Bank of Russia's Board of Directors decided to extend conditions for risk-oriented incentive-based regulation. This extension applies to projects focused on technological sovereignty and structural economic adaptation (TS and SAE).
The regulator has now allowed banks to apply these regulations to projects initiated before September 30, 2022, as long as less than 15% of the project budget was spent by October 1, 2022. Previously, this regulation only applied to projects launched after September 30, 2022. Additionally, banks can now refinance loans from other banks that meet TS and SAE criteria—a provision not available earlier.
Investors are no longer required to invest equity in eligible high-quality project financing. Earlier rules mandated a minimum contribution of at least 20%. Furthermore, banks can apply incentive-based regulation for up to ten years from the date of issuing their first loan under a concession agreement. For other projects, the maximum period remains seven years.
These changes aim to enhance banks' capacity to finance critical projects and promote risk-sharing among financial institutions for large-scale endeavors.
In light of certain large TS and SAE projects' low risk and high economic significance under concession agreements, the Bank of Russia has relaxed some criteria for applying incentive-based regulation. Banks can now apply a lower risk weight of 65% for high-quality projects if they use the finalized approach for calculating capital adequacy ratios. This corresponds with the risk weight assigned to reliable investment-grade companies. Moreover, such projects can be regarded as having the highest credit quality if classified as quality category I.
These provisions are applicable only if specific criteria are met: The grantor must be the Russian Federation; the concession agreement should ensure interest payment and principal repayment by the grantor if terminated; and the lending bank must have rights to initiate termination if obligations are unmet by the concessionaire.
Looking ahead, the Bank of Russia plans to draft special regulations for concession agreements aimed at stipulating risk mitigation factors beyond TS and SAE projects.