In its latest effort to counter financial instability - and show its commitment to maintaining order and support for the economy - Russia's Central Bank (CBR) has unveiled 7 new measures... Ranging from bank recaps to measures aimed at helping manage interest-rate and credit risks, the reaction in the Ruble is positive for now... as perhaps, taking a lesson from the US, The CBR removes Mark-to-Market accounting for various credit instruments.
The Central Bank of the Russian Federation (Bank of Russia)
On measures of the Bank of Russia to maintain the stability of the Russian financial sector
1. The Bank of Russia will introduce a temporary moratorium on the recognition of the negative revaluation of securities portfolios of credit institutions and non-credit financial institutions, which will reduce the sensitivity of market participants to market risk.
2. To limit the impact of the revaluation of foreign currency denominated assets and liabilities on prudential requirements of credit institutions, the Bank of Russia plans to provide credit institutions temporary right to use in the calculation of prudential requirements on transactions in foreign currency rate calculated in the previous quarter.
3. The Bank of Russia will improve the mechanism of credit institutions in foreign currency. Within the framework of a currency Repo planned additional auctions for various periods of time if necessary. As part of the mechanism for providing loans to credit institutions secured by non-marketable assets (according to the Regulation number 312-P), is scheduled to begin providing loans to banks in foreign currency, secured credit claims in foreign currency to non-financial organizations.
4. The Bank of Russia considers the central counterparty on the Moscow Stock Exchange as an important institution for centralized distribution of liquidity among all financial market participants - both credit and non-credit financial institutions. To ensure the sustainability of the stock market for the Bank of Russia, if necessary, will provide support to the central counterparty on the Moscow Stock Exchange, market participants have confidence in the reliability of centralized clearing and continuity of its functions.
5. To empower Interest Rate Risk Management The Bank of Russia plans to:
- Temporary (up to 07.01.2015) not to apply the restriction values of the total cost of consumer credit (loan) at the conclusion of credit and microfinance institutions in consumer contracts (loan);
- Increase the range of the standard deviation of market interest rates on deposits in banks from the estimated average market interest rate to a maximum of 3.5 percentage points (instead of 2 percentage points at the moment).
6. To enhance the management of credit risks, the Bank of Russia intends to:
- To give credit institutions an opportunity not to impair the quality assessment of debt service, regardless of the assessment of the financial position of the borrower on loans restructured, for example, in the case of changes in the currency in which the loan is denominated, regardless of changes in the maturity of the loan (principal and (or) percent ), the interest rate;
- To give credit institutions an opportunity to make a decision on non-worsening assessment of the financial position of the borrower for the purpose of provision for losses if the changes in financial position due to the action imposed by individual foreign countries restrictive economic and (or) policy measures (Annex to the letter of the Bank of Russia from 21.10.2014 ? 184 -T);
- To increase the period during which the credit institution has the right not to increase the size Actual provision of loans to borrowers, financial position, and (or) quality of debt service, and (or) as collateral for loans has deteriorated as a result of an emergency, from 1 year to 2 years.
- To increase the period during which a credit institution can not form a provision for possible losses on loans for investment projects, while maintaining other existing minimum reserve requirements set depending on the number of years, the lack of payments on investment loans or entering the minor size;
- To cancel the increased rate risk with respect to loans to leasing and factoring companies - participants of the banking group, which includes the lending bank;
- Introduce a reduced weighting factor of risk for the ruble-denominated loans to Russian exporters under an insurance contract EXIAR (Export Insurance Agency of Russia).
7. In order to maintain the stability of the banking sector in the face of increased interest rate and credit risks of a slowdown of the Russian economy the Bank of Russia and the Government of the Russian Federation prepare measures to recapitalize credit institutions in 2015.
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So far a modestly positive reaction the Ruble...
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and Russian Stocks are rallying...
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Are traders greatly rotating back to Russia?
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Charts: Bloomberg
