The Bank of Russia has announced several decisions regarding banking regulation, with a focus on capital adequacy and credit risk management. The national countercyclical buffer (CCyB) for banks' capital adequacy ratio is set to be adjusted. From February 1, 2025, the CCyB will be at 0.25% and will increase to 0.5% by July 1, 2025.
This decision follows an unexpected rise in corporate lending after the Bank of Russia initially set the CCyB at 0.25% in August 2024. Since the start of the year, corporate loans have surged by 14.5%, with a notable increase of 6.4% in the third quarter alone and an additional growth of 2.2% in October.
While banks have been building buffers for consumer and mortgage loans amounting to ₽1.1 trillion as of October 1, no similar measures have been taken for rapidly growing corporate loans. The N1.0 capital adequacy ratio in the banking sector fell from 13.3% at the beginning of the year to 12.1% by October.
To address overheating in credit markets, banks are encouraged to accumulate capital buffers against systemic risks more quickly. The increase in CCyB aims to enhance bank resilience and ensure balanced economic lending growth.
In addition, regulatory amendments are being prepared to limit credit risks associated with large corporates, which contribute over half of the growth in corporate lending portfolios this year due to their insensitivity to interest rate changes.
To mitigate these risks, macroprudential regulations will be amended to allow risk-weight add-ons for banks' credit claims on heavily indebted large corporates. Furthermore, there will be an increase in minimum risk weights on large corporate loans for banks using internal ratings-based approaches by mid-2025.
Lastly, the Bank of Russia plans a temporary expansion in using irrevocable credit lines (ICL) by systemically important banks to comply with liquidity coverage ratios (LCR). Adjustments will be made to ICL limits calculation methodologies until July 2025 without altering other parameters such as fee calculation procedures or variable rates.
These regulatory changes aim at stabilizing bank operations amidst rising credit demands while maintaining financial stability within Russia's banking sector.