Appendix I. 2011 FSAP Stability Module Recommendations Status
Some forbearance measures affected provisions and cannot be reversed. Consequently, staff made adjustments to asset quality and provisions in the stress test scenarios, as discussed below.
FX loans are mostly extended to the largest and strongest corporations in Russia. Consequently, provisioning rates are lower and NPLs tend to increase less than for ruble-denominated loans.
The exposure of Russian banks to Ukraine, including interbank loans and loans to individuals and firms, was estimated at 1.1 percent of Russia’s GDP in January 2016.
Financial spillovers are defined as the impact of asset price movements or volatility in a given country on asset prices in other countries, when accounting for common shocks. See Global Financial Stability Report, Chapter 2, April 2016.
During late 2014, the significant fall in oil prices and the flight from ruble denominated assets led to large margin calls on the secured interbank market and the emergence of collateral constraints. As a result, market rates were pushed through CBR’s interest rate corridor ceiling, and the yield curve became inverted for two-three days.
A comprehensive analysis of sovereign risks was not undertaken given that supervisory data were not available.
The aggregate capital deficit is defined as the amount of additional capital needed to bring all banks up to at least the 8 percent CAR minimum.
While staff assessed asset quality conservatively, a more detailed review of asset quality (bank by bank, portfolio by portfolio, and loan by loan) may reveal somewhat larger capital deficits.
The stress testing methodologies model loan impairment charges, with NPLs growing in line with loan impairment charges. As CBR did not provide NPL numbers under different scenarios, staff calculated NPLs based on CBR’s credit loss estimates.
These peak level deficits occur in different years, 2017 in the V-shaped scenario, and 2019 in the L-shaped scenario.
The FSC is currently chaired by First Deputy Prime Minister and comprises eleven other senior officials, including the CBR Governor, Minister of Finance, Minister of Economic Development, and DIA General Director.
A bill is being drafted to provide CBR with the power to conduct a statutory bail-in.
Loans are typically provided for 10 years at 0.5 percent interest (compared to market rate of 10–11 percent).
CBR earmarked funding of DIA’s resolution activities also creates a conflict of interest for CBR in supervising banks undergoing open bank resolution.
This constraint would be magnified in a low interest rate environment, which is likely to achieve when the CBR inflation target is met.