## _cr16307

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### Executive summary — overall policy framework
- Financial stability oversight responsibilities are shared between the Central Bank of Russia (CBR) and a high-level inter-agency National Council on Ensuring Financial Stability (FSC).
- Since September 2013 CBR has been the single financial regulator and supervisor and has become the de facto macroprudential authority.
- CBR institutional developments:
  - Financial Stability Department created in March 2011.
  - Internal Financial Stability Committee (FSCom) established in November 2014; policy decisions remain with CBR’s Board of Directors (CBR Board).
- FSC created by government decree in July 2013 as an advisory body; strengthened in February 2015 and serves as an effective platform for inter-agency coordination.
- Only CBR has a financial stability mandate anchored in law; MOED and MOF were designated as responsible government bodies by decree in February 2015, though precise functions and powers were not specified.
- CBR’s macroprudential framework:
  - Defines macroprudential policy as primarily the use of prudential tools (microprudential and monetary operations) to limit systemic risk.
  - Considers liquidity provision an important tool for maintaining financial stability.
  - Financial Stability Department performs macroprudential surveillance, including NBFIs, nonfinancial corporates, and oversight of CCPs.
  - Financial Stability Review published since 2003 and upgraded to biannual publication since 2012.

### Use of macroprudential tools — experiences and key statistics
- Four broad risk types targeted since 2007: banks’ reliance on foreign funding, excessive growth of unsecured consumer loans, mortgage lending to relatively risky borrowers, and banks’ exposure to exchange rate risks.
- Foreign funding and reserve requirements:
  - Foreign liabilities relative to total banking sector assets (net of interbank claims) rose from 12.7 percent in August 2004 to 23.4 percent in August 2007.
  - Differentiated reserve requirements applied 2004–2008; between July 2007 and September 2008 the reserve rate on liabilities to nonresident banks was raised from 3.5 to 8.5 percent.
  - Differentiated reserve requirements re-introduced in February 2011; applied uniformly again in February 2013 at 4.25 percent when no systemic risk was apparent.
- Unsecured consumer lending:
  - Annual growth rate of unsecured consumer lending exceeded 50 percent by mid-2012; overall lending growth was below 30 percent.
  - Effective interest rates for unsecured consumer lending exceeded 50 percent when inflation was around 7 percent.
  - CBR tightened provisioning requirements and raised capital risk weights for unsecured consumer loans during January 2013–January 2014; capital risk weights were differentiated by level of effective lending rates.
  - Consumer Credit Law adopted December 2013; caps on effective lending rates introduced July 2014.
- Mortgage lending:
  - Mortgage lending grew around 30 percent year-on-year between late-2011 and early-2015.
  - May 2009: capital risk weight reduced from 1.0 to 0.7 for certain mortgage loans.
  - October 2011: capital risk weight raised from 1.0 to 1.5 for higher-risk mortgage loans.
  - Differentiated capital risk weights repeatedly adjusted; extensive use reflects lack of legal power to impose limits on LTV and DSTI ratios.
- De-dollarization measures:
  - As of January 2016, foreign-currency loans accounted for 31 percent of total banks loans, while foreign-currency deposits amounted to 41 percent of total deposits.
  - April 2016: reserve requirement rate for banks’ foreign-currency liabilities except individual deposits is 1 percentage point higher than the regular reserve requirement rate (regular rate 4.25 percent).
  - August 2016: all banks’ foreign-currency liabilities subject to higher requirement rates by 1 percentage point for individual deposits and 2 percentage points for other liabilities.
  - May 2016: higher capital risk weights imposed for certain foreign-currency exposures.
  - CBR limits on banks’ net open foreign-exchange position have been used to protect banks from sizeable exchange rate fluctuations.

### Macroprudential toolkit (legal basis and instruments)
- Capital-based tools:
  - Sectoral capital risk weights; Countercyclical capital buffers (CCBs); Capital surcharges on systemically important banks (SIBs); Leverage ratios.
- Liquidity-based tools:
  - Liquidity coverage ratios (LCRs); Net stable funding ratios (NSFRs); Reserve requirements (available in the context of monetary operations).
- Additional powers and limits in CBR Law:
  - Provisioning rules; limits on open foreign-currency positions, interest rates, and other financial risks.
  - Concentration risk limits: lending to a party or group of related borrowers may not exceed 25 percent of regulatory capital; total high-concentration risk exposures limited to 800 percent of regulatory capital; high-concentration risk exposure defined as exposure to a party that exceeds 5 percent of regulatory capital.
- Liquidity metrics under CBR Law (daily requirements N2, N3, N4):
  - hold liquid assets to cover 15 percent of immediate liquidity needs over the next day;
  - maintain liquid assets to short-term liabilities at 50 percent over the one-month horizon;
  - maintain expected liquidity inflows relative to outflows over the one-year horizon at 120 percent.
- Committed liquidity facility (CLF) and LCR options:
  - No plan to impose LCR by currencies; SIBs report LCRs in ruble and all significant foreign currencies monthly.
  - CLF established due to shortage of domestic high-quality liquid assets (option I).
  - Use of high-quality liquid assets in major foreign currencies to cover ruble liquidity needs is allowed (option II).

### Implementation status (beginning of 2016) and calibration
- Countercyclical capital buffer (CCB):
  - CBR considers the CCB the main countercyclical macroprudential tool.
  - Inter-departmental Working Group for Monitoring the Credit Cycle and Controlling the Amount of CCB established; chaired by a First Deputy Governor.
  - Calibration based on credit-to-GDP gaps, credit growth rates, and NPL ratios; Working Group recommends quarterly to FSCom; FSCom recommends to CBR Board.
- Capital surcharge on SIBs:
  - List of SIBs includes 10 banks accounting for about 60 percent of banking system assets.
  - Capital surcharge imposed at 0.15 percent of risk weighted assets from the beginning of 2016, with gradual increases to 1 percent by the beginning of 2019.
- LCR:
  - Applied only to SIBs, minimum rate of 70 percent from the beginning of 2016; phase-in follows internationally agreed schedule.
  - All banks must fulfill the three distinct daily liquidity requirements (N2, N3, N4).

### Assessment of effectiveness, limits, and remaining vulnerabilities
- Effectiveness:
  - Tightening provisioning requirements and capital risk weights mitigated systemic risk from unsecured consumer lending and improved banks’ resilience.
  - Banking system benefited from buffers built by additional provisions, helping avert a full-blown banking crisis.
  - Slowdown in unsecured consumer lending driven by multiple factors: stricter macroprudential requirements (with some lag), higher than expected credit losses, and caps on effective lending rates.
  - Loans subjected to higher capital risk weights continued to increase more strongly than loans not affected, indicating limits in moderating credit growth via capital measures alone.
  - Back-of-the-envelope calculation: an increase in the capital risk weight by 1 (e.g., from 1 to 2) is equivalent to an increase in funding costs by 1.5 percentage points, assuming a regulatory capital requirement at 10 percent and a return on equity of 15 percent.
- Other historical tools:
  - Reserve requirements on external funding (2007–08) curbed reliance on external funding; earlier introduction could have lessened the sudden stop impact.
  - Differentiated capital risk weights for mortgage lending since 2009 helped contain risks while supporting creditworthy borrowers; lowest capital risk weight for mortgage loans is 0.35 (Basel standardized approach level).
  - Measures to support de-dollarization aimed at reducing foreign-currency liquidity risk and internalizing exchange rate volatility risk.
- Remaining vulnerabilities:
  - Strong credit growth (about 20 percent annually) during 2011–14 coincided with increased vulnerabilities: declining capital buffers, increasing leverage, deteriorating liquidity conditions.
  - Reliance on CBR funding may be supporting balance sheet growth; inadequate capital buffers led to reliance on regulatory forbearance.
  - Structural mismatch in meeting LCR due to scarcity of government debt securities; heavy reliance on short-term funding and large exposures persist.
- Oil dependence risk:
  - Significant dependence on oil makes the financial system vulnerable to large oil price movements.
  - Indirect impact of low oil prices produced a broad-based materialization of credit risk during the down-cycle, even though direct impact on oil and gas industry and the banking system is limited.
- Sectoral observations (selected):
  - Oil and gas sector remains profitable due to cost structure and tax system; exchange rate depreciation cushioned revenues.
  - Corporate sector: debt servicing capacity deteriorated; NPLs rose, notably in construction and real estate; smaller corporates in weak positions.
  - Household sector: credit quality worsened mainly from consumer lending NPLs; no signs of material credit risk in mortgage lending.
  - Exchange rate risks appear manageable; aggregate corporate sector net foreign-currency position vis-à-vis the domestic banking system about 4 percent of GDP.

### Legal and operational limitations of CBR’s toolkit
- Russian legal practice requires prudential tools to be rather explicit, with sufficient details in the CBR Law.
- CBR Law currently prescribes a limited number of macroprudential tools and does not provide legal foundation for tools such as limits on LTV and DSTI ratios or limits on growth of particular credit segments.
- Some Basel III prudential tools (leverage ratios, NSFR) have legal basis but have not yet been implemented.
- Prudential requirements must be prescribed explicitly in law; flexibility exists (example: liquidity requirements).

### Recommendations — policy design, legal reform, and calibration
- Main recommendations (from Table 1):
  - Amend the CBR Law to provide CBR with a comprehensive macroprudential policy toolkit (CBR, MOF) — Short term.
  - Expand use of macroprudential tools to establish adequate buffers to safeguard financial stability in the medium term (CBR) — Medium term.
  - Further develop macrofinancial and systemic risk analysis (CBR) — Medium term.
- Other recommendations (selected):
  - Employ macroprudential tools to support de-dollarization, though primarily motivated by systemic risk mitigation (CBR) — Short term.
  - Adjust the calibration of the countercyclical capital buffer, using a wider set of indicators to properly evaluate the credit cycle (CBR) — Short term.
  - Clarify the scope of the FSC’s responsibilities, in line with its role as an advisory body (Government) — Short term.
  - Formalize arrangements for regular CBR Board meetings to discuss systemic risk issues, along with publication of the assessment (CBR) — Short term.
  - Enhance CBR’s accountability for the conduct of macroprudential policy through greater transparency (CBR) — Short term.
  - Enhance Financial Stability Review to better communicate CBR’s overall view of financial stability risks and the financial system’s resilience (CBR) — Short term.
  - Strengthen the prudential liquidity requirement to improve banks’ funding structure (CBR) — Medium term.
  - Consider amending the CBR Law to more fully prescribe the financial stability framework (CBR, MOF) — Medium term.
  - Establish a dedicated policymaking committee (“Financial Policy Committee”) within CBR, supported by appropriate objectives, functions and powers, to conduct macroprudential policy (CBR, MOF) — Medium term.
  - Increase capacity to obtain more corporate and household balance sheet information (CBR) — Medium term.

### Institutional arrangements and governance — assessment and actions
- Current situation:
  - Financial stability oversight shared between CBR and FSC; CBR is in charge of conducting macroprudential policy.
  - FSC strengthened February 2015; chaired by the First Deputy Prime Minister; membership includes CBR Governor, Minister of Economic Development, Minister of Finance, and DIA General Director.
  - FSCom (internal CBR committee) established November 2014; chaired by CBR Governor and includes four First Deputy Governors.
  - CBR has broad data access and can obtain confidential financial information from significant nonfinancial corporates.
- Assessment:
  - Current institutional arrangements function well and strike a balance between CBR’s role and inter-agency coordination.
  - FSCom central for internal coordination; FSC useful for high-level inter-agency exchange.
  - The arrangements have not yet been fully tested in scenarios requiring strong macroprudential actions; CBR Board may face difficult choices balancing price stability and financial stability.
- Governance recommendations:
  - Maintain FSC as an advisory body but clarify its scope to ensure CBR autonomy; explicitly establish that FSC cannot override CBR macroprudential decisions.
  - Formalize regular CBR Board meetings on systemic risk "at least every quarter" with publication of assessments.
  - Consider creating an internal policymaking committee (Financial Policy Committee) within CBR to assume policymaking responsibility (replacement or upgrade of FSCom), with clear governance, accountability, and powers.
  - Enhance transparency: publish committee meeting records summarizing key decisions and make warnings and recommendations public (comply-or-explain); record minority views.

### Technical capacity, data gaps, and communication
- CBR has necessary technical capacity, a systemic risk dashboard, and regularly conducts solvency and liquidity stress tests; additional development desirable.
- Key analytical gaps:
  - Early warning system to detect medium-term vulnerabilities across nonfinancial sectors and markets.
  - Integrated macroprudential stress testing accounting for second-round effects, solvency-liquidity links, cross-sectoral interconnectedness, and external sector developments (global financial conditions, commodity prices, main trading partners).
  - Better "connecting the dots" in Financial Stability Review: clearer presentation of systemic risks, propagation through macrofinancial linkages, and banking system resilience.
- Data and surveillance enhancements:
  - Expand capacity to compile flow of funds statistics, obtain corporate financial statements for a broader set of companies, and conduct a household finance survey.
  - Close data gaps on unregulated financial activities (for example, leasing) and cross-sectoral/cross-border operations.
- Communication improvements:
  - Strengthen Financial Stability Review by highlighting main systemic risks up front (risk assessment matrix), adding a financial stability map, and linking stress testing to buffer requirements.
  - Publish records of committee meetings and minority views to enhance policymaking transparency.

### Appendix: institutional progress and tool availability (selected)
- Institutional timeline highlights:
  - December 2010: Working Group to Monitor Financial Market Conditions created.
  - March 2011: Financial Stability Department established in CBR.
  - July 2013: FSC created.
  - September 2013: CBR became integrated financial oversight authority.
  - November 2014: FSCom established.
  - February 2015: FSC strengthened; MOED and MOF designated as responsible government bodies for ensuring financial stability.
- Appendix Table 3 (tool legal basis) — selected entries:
  - Countercyclical capital buffer: √
  - Leverage ratio: √
  - Dynamic/general provisioning requirement: √
  - Limit on growth of overall credit: ×
  - Sectoral capital requirement (household/corporate): √
  - Limit on LTV/DSTI: ×
  - Liquidity buffer requirement: √ (N2, N3, LCR in place)
  - Stable funding requirement: √ (N4, NSFR in place)
  - Reserve requirement: √ (higher reserve requirement on certain foreign-currency liabilities since April 2016)
  - Limit on open foreign-exchange position: √
  - Outright limit on foreign-currency funding: ×
  - Capital surcharge on SIFIs: √
- Appendix Table 4 (progress on FSB recommendations) — selected progress:
  - Clarify FSC role: Progress: None.
  - Enhance FSC effectiveness (membership, secretariat, comply-or-explain): Progress: membership strengthened; FSC can make recommendations on a comply-or-explain basis; secretariat established.
  - Amend CBR Law to provide legal foundation for comprehensive macroprudential toolkit: Progress: None.

*Source: EXECUTIVE SUMMARY and chapter excerpts from IMF staff analysis (IMF Technical Note prepared by Phakawa Jeasakul (MCM)) contained in content unit _cr16307.*

### EXECUTIVE SUMMARY __________________________________________________________________________ 4

### EXECUTIVE SUMMARY

### Overall policy framework
- Financial stability oversight responsibilities are shared between the Central Bank of Russia (CBR) and a high-level inter-agency National Council on Ensuring Financial Stability (FSC).
- Since September 2013 CBR has been the single financial regulator and supervisor and has become the de facto macroprudential authority.
- CBR institutional developments:
  - Financial Stability Department created in March 2011.
  - Internal Financial Stability Committee (FSCom) established in November 2014; policy decisions remain with CBR’s Board of Directors (CBR Board).
- FSC created by government decree in July 2013 as an advisory body; strengthened in February 2015 and serves as an effective platform for inter-agency coordination.
- Only CBR has a financial stability mandate anchored in law; MOED and MOF were designated as responsible government bodies by decree in February 2015, though precise functions and powers were not specified.
- CBR’s macroprudential framework:
  - Defines macroprudential policy as primarily the use of prudential tools (microprudential and monetary operations) to limit systemic risk.
  - Considers liquidity provision an important tool for maintaining financial stability.
  - Financial Stability Department performs macroprudential surveillance, including NBFIs, nonfinancial corporates, and oversight of CCPs.
  - Financial Stability Review published since 2003 and upgraded to biannual publication since 2012.

### Use of macroprudential tools — Experiences
- CBR has used macroprudential tools to address four broad risk types since 2007: banks’ reliance on foreign funding, excessive growth of unsecured consumer loans, mortgage lending to relatively risky borrowers, and banks’ exposure to exchange rate risks.
- Foreign funding and reserve requirements:
  - Foreign liabilities relative to total banking sector assets (net of interbank claims) rose from 12.7 percent in August 2004 to 23.4 percent in August 2007.
  - Differentiated reserve requirements were applied between 2004–2008 to contain reliance on foreign funding; between July 2007 and September 2008 the reserve rate on liabilities to nonresident banks was raised from 3.5 to 8.5 percent.
  - Differentiated reserve requirements were re-introduced in February 2011 with higher rates on liabilities to nonresident legal entities; applied uniformly again in February 2013 when no systemic risk was apparent.
- Unsecured consumer lending:
  - Annual growth rate of unsecured consumer lending exceeded 50 percent by mid-2012, while overall lending growth was below 30 percent.
  - Effective interest rates for unsecured consumer lending exceeded 50 percent when inflation was around 7 percent.
  - CBR tightened provisioning requirements and raised capital risk weights for unsecured consumer loans during January 2013–January 2014; capital risk weights were differentiated by level of effective lending rates.
  - Caps on effective lending rates were imposed on various loan types with the Consumer Credit Law adopted in December 2013 (caps introduced July 2014).
- Mortgage lending:
  - Mortgage lending grew around 30 percent year-on-year between late-2011 and early-2015.
  - May 2009: capital risk weight reduced from 1.0 to 0.7 for mortgage loans in ruble of less than RUB 50 million, with LTV below 70 percent and DSTI below 33⅓ percent.
  - October 2011: capital risk weight raised from 1.0 to 1.5 for mortgage loans of more than RUB 50 million and LTV above 80 percent.
  - CBR has repeatedly tightened or loosened differentiated capital risk weights based on stress testing and loan risk profiles.
  - Extensive use of differentiated capital risk weights reflects lack of legal power to impose limits on LTV and DSTI ratios.
- De-dollarization:
  - More recently, CBR imposed a stricter reserve requirement on nonretail foreign-currency deposits and higher capital risk weights on certain foreign-currency exposures to reduce dollarization.

### Use of macroprudential tools — Assessment and rationale
- An expanded use of macroprudential tools to build adequate buffers could help safeguard financial stability in the medium term.
- The economy is highly exposed to swings in oil prices, which can significantly affect financial conditions and amplify business cycles through macrofinancial linkages.
- Greater volatility from oil price movements may warrant a larger buildup of buffers to protect banks against solvency risk.
- Liquidity requirements might be strengthened to improve banks’ funding structure.
- Macroprudential tools could support de-dollarization, but their use should be motivated primarily by systemic risk mitigation; attention must be paid to unintended consequences and policy leakages.

### Institutional arrangements
- Current arrangements function well, but additional steps could support timely macroprudential actions when needed.
- Effective coordination within CBR has been instrumental in identifying and mitigating systemic risk; however, it is important to ensure arrangements work when strong, decisive macroprudential actions are required.
- Recommendations include enhancing governance and accountability, fuller prescription of the macroprudential policy framework in the CBR Law, and clarifying FSC’s advisory scope to ensure CBR autonomy.

### Technical capacity for systemic risk monitoring and assessment
- CBR has necessary technical capacity and regularly publishes Financial Stability Review, indicating strong analytical capacity.
- Areas for additional work:
  - Conduct early warning exercises to detect underlying vulnerabilities.
  - Carry out macroprudential stress testing that accounts for second-round effects, solvency-liquidity links, and cross-sectoral interconnectedness.
  - Focus on “connecting the dots” — clearer presentation of systemic risks, propagation through macrofinancial linkages, and banking system resilience in Financial Stability Review to improve public communication.

### Key recommendations (from Table 1)
- Main recommendations:
  - Amend the CBR Law to provide CBR with a comprehensive macroprudential policy toolkit (CBR, MOF) — Short term.
  - Expand use of macroprudential tools to establish adequate buffers to safeguard financial stability in the medium term (CBR) — Medium term.
  - Further develop macrofinancial and systemic risk analysis (CBR) — Medium term.
- Other recommendations:
  - Employ macroprudential tools to support de-dollarization, though primarily motivated by systemic risk mitigation (CBR) — Short term.
  - Adjust the calibration of the countercyclical capital buffer, using a wider set of indicators to properly evaluate the credit cycle (CBR) — Short term.
  - Clarify the scope of the FSC’s responsibilities, in line with its role as an advisory body (Government) — Short term.
  - Formalize arrangements for regular CBR Board meetings to discuss systemic risk issues, along with publication of the assessment (CBR) — Short term.
  - Enhance CBR’s accountability for the conduct of macroprudential policy through greater transparency (CBR) — Short term.
  - Enhance Financial Stability Review to better communicate CBR’s overall view of financial stability risks and the financial system’s resilience (CBR) — Short term.
  - Strengthen the prudential liquidity requirement to improve banks’ funding structure (CBR) — Medium term.
  - Consider amending the CBR Law to more fully prescribe the financial stability framework (CBR, MOF) — Medium term.
  - Establish a dedicated policymaking committee (“Financial Policy Committee”) within CBR, supported by appropriate objectives, functions and powers, to conduct macroprudential policy (CBR, MOF) — Medium term.
  - Increase the capacity to obtain more corporate and household balance sheet information (CBR) — Medium term.

*Source: EXECUTIVE SUMMARY, IMF Technical Note (prepared by Phakawa Jeasakul (MCM)).*

### 8. Macroprudential tools have been used to support the effort to de-dollarize the

### 8. Macroprudential tools have been used to support the effort to de-dollarize the

### De-dollarization measures and foreign-currency exposures
- The banking system is exposed to foreign-currency related risks owing to a generally high level of dollarization.
- As of January 2016, foreign-currency loans accounted for 31 percent of total banks loans, while foreign-currency deposits amounted to 41 percent of total deposits.
- In April 2016, CBR started adopting the differentiated reserve requirements approach by applying a higher reserve requirement rate on foreign-currency liabilities to mitigate foreign-currency liquidity risk.
  - In April 2016, the reserve requirement rate for banks’ foreign-currency liabilities except individual deposits is 1 percentage point higher than the regular reserve requirement rate, which remains unchanged at 4.25 percent.
  - In August 2016, all banks’ foreign-currency liabilities will be subject to the higher requirement rates by 1 percentage point for individual deposits and 2 percentage points for other liabilities.
- In May 2016, CBR imposed higher capital risk weights for certain foreign-currency exposures to reflect the greater risk of these exposures owing to exchange rate volatility.
- CBR’s limits on banks’ net open foreign-exchange position have helped protect banks from sizeable exchange rate fluctuations.

### Macroprudential toolkit (CBR)
- Capital-based tools:
  - Sectoral capital risk weights
  - Countercyclical capital buffers (CCBs)
  - Capital surcharges on systemically important banks (SIBs)
  - Leverage ratios
- Liquidity-based tools:
  - Liquidity coverage ratios (LCRs)
  - Net stable funding ratios (NSFRs)
  - Reserve requirements (available in the context of monetary operations)
- Additional powers and limits:
  - CBR can set provisioning rules and limits on the open position in foreign currencies, interest rates, and other financial risks.
  - The CBR Law sets limits on concentration risks (lending to a party or group of related borrowers may not exceed 25 percent of regulatory capital; total high-concentration risk exposures are limited to 800 percent of regulatory capital; high-concentration risk exposure defined as exposure to a party that exceeds 5 percent of regulatory capital).
- Specific liquidity metrics under the CBR Law (daily requirements):
  - Banks must meet three distinct liquidity requirements (N2, N3, and N4 ratios):
    - hold liquid assets to cover 15 percent of immediate liquidity needs over the next day
    - keep a ratio of liquid assets to short-term liabilities at 50 percent over the one-month horizon
    - maintain an expected stream of liquidity inflows relative to liquidity outflows over the one-year horizon at 120 percent
  - CBR Law allows additional liquidity requirements on SIBs, giving CBR the option to apply the LCR only to SIBs.
- Committed liquidity facility (CLF) and LCR options:
  - There is no plan to impose the LCR requirement by currencies, but SIBs are required to report LCRs in ruble and all significant foreign currencies on a monthly basis.
  - Given shortage of domestic high-quality liquid assets such as domestic government bonds, CBR has established the committed liquidity facility (CLF) (option I).
  - The use of high-quality liquid assets in major foreign currencies to cover ruble liquidity needs is allowed (option II).

### Implementation of key instruments (beginning of 2016)
- CCB:
  - CBR considers the CCB the main countercyclical macroprudential tool.
  - An inter-departmental Working Group for Monitoring the Credit Cycle and Controlling the Amount of CCB, chaired by a First Deputy Governor, was established to calibrate the CCB.
  - The Working Group recommends quarterly to the FSCom; FSCom recommends to the CBR Board for final decision.
  - Calibration is based on indicators such as credit-to-GDP gaps, credit growth rates, and nonperforming loan (NPL) ratios.
- Capital surcharge on SIBs:
  - CBR published a list of SIBs including 10 banks accounting for about 60 percent of banking system assets.
  - SIBs identification criteria include size, interconnectedness, systemic impact (market share of household deposits), and complexity (scope of cross-border activities).
  - The capital surcharge will be imposed at 0.15 percent of risk weighted assets from the beginning of 2016, with gradual increases to 1 percent by the beginning of 2019.
- LCR:
  - The LCR is applied only to SIBs, with a minimum rate of 70 percent from the beginning of 2016.
  - The phase-in will follow the internationally agreed schedule.
  - SIBs must report LCRs in ruble and all significant foreign currencies monthly.
  - All banks must also fulfill the three distinct daily liquidity requirements (see above).

### Assessment of financial stability and macroprudential impact
- Financial stability has been maintained despite two large shocks—low oil prices and western sanctions—supported by a multi-pronged policy response.
- Macroprudential policies contributed by helping to contain systemic risk related to unsecured consumer lending and proactively monitoring corporate sector vulnerabilities.
- Key sectoral observations:
  - Oil and gas sector:
    - Remains profitable due to cost structure and tax system.
    - Exchange rate depreciation has helped cushion revenues of energy companies from lower oil prices.
    - Cost structure is primarily in ruble and the tax system exacts less per barrel as oil prices fall.
    - Russian oil and gas companies are among the lowest-cost producers globally.
  - Corporate sector:
    - Corporate debt servicing capacity has deteriorated, and NPLs have risen.
    - Among larger corporates, debt of companies with low debt servicing capacity increased sharply in early 2015.
    - Smaller corporates, which largely rely on domestic banking financing, were in weak financial position even before the downturn.
    - Corporate NPLs have increased, particularly with deterioration in construction and real estate.
  - Household sector:
    - Credit quality of household exposures has worsened, mainly due to increasing NPLs from consumer lending.
    - Excessive unsecured consumer lending in earlier years led to materialization of credit risk after the downturn.
    - Banks have seen a sharp increase in NPLs in consumer lending portfolios, but overall impact remains manageable despite unfavorable macroeconomic conditions.
    - No signs of material credit risk associated with mortgage lending.
  - Exchange rate risks:
    - Overall, exchange rate risks appear manageable.
    - Aggregate corporate sector has a small net foreign-currency position vis-à-vis the domestic banking system (about 4 percent of GDP) thanks to large foreign-currency deposits.
    - Forthcoming payments related to external corporate debt (excluding intra-group payments that are typically rolled over) are sufficiently covered by liquid foreign-currency assets held by corporates.

### Effectiveness and limits of macroprudential measures
- Systemic risk related to unsecured consumer lending was mitigated by tightening provisioning requirements and capital risk weights.
  - Tightening of provisioning requirements and capital risk weights helped avert a full-blown banking crisis and improved banks’ resilience.
  - Banking system was in a stronger position to absorb losses because of buffers built by additional provisions.
  - Slowdown in unsecured consumer lending appears driven by multiple factors: stricter macroprudential requirements (with some lag), higher than expected credit losses, and caps on effective lending rates.
  - Loans subjected to higher capital risk weights continued to increase more strongly than loans not affected by the measures.
  - There is a lack of conclusive evidence that stricter bank capital risk weights or provisioning requirements effectively moderated credit growth, indicating a need for more effective tools (e.g., limits on growth of certain lending) or simultaneous application of multiple tools.
    - A back-of-the-envelope calculation suggests that an increase in the capital risk weight by 1 (for example, from 1 to 2) would be equivalent to an increase in funding costs by 1.5 percentage points, assuming a regulatory capital requirement at 10 percent and a return on equity of 15 percent.
- Other macroprudential tools used since 2007:
  - Reserve requirements on banks’ external funding:
    - Higher reserve requirements on banks’ liabilities to nonresident banks during 2007–08 curbed reliance on external funding.
    - An earlier introduction could have helped alleviate the negative impact of the sudden stop of foreign funds during the global financial crisis.
  - Capital risk weights for mortgage lending:
    - Differentiated capital risk weights based on loan risk characteristics since 2009 have preemptively contained risks while supporting mortgage lending to creditworthy borrowers.
    - The lowest capital risk weight for mortgage loans is at 0.35—the level used by the Basel standardized approach.
    - Minimal increase in NPLs in mortgage lending following the downturn suggests usefulness of these measures.
  - Measures to support de-dollarization:
    - Recent macroprudential measures aim at reducing banks’ foreign-currency liquidity risk and inducing banks to internalize exchange rate volatility risk associated with foreign-currency exposures.
- Remaining vulnerabilities:
  - Increased banking system vulnerabilities arose concurrently with strong overall credit growth (about 20 percent annually) during 2011–14.
  - Declining capital buffers, increasing leverage, and deteriorating liquidity conditions contributed to vulnerabilities.
  - Banks’ ability to obtain funding from CBR may be supporting balance sheet growth.
  - Inadequate capital buffers led to reliance on regulatory forbearance (asset classification and loss provisioning) to help banks withstand severe shocks.
  - Meeting the LCR requirement on their own may entail a structural mismatch between high-quality liquid assets and potential funding outflows, partly owing to lack of government debt securities.
  - Structural vulnerabilities persist: heavy reliance on short-term funding and large exposures.
- Oil dependence risk:
  - The economy’s significant dependence on oil makes the financial system vulnerable to large oil price movements.
  - Exposure to oil prices may significantly affect financial conditions and amplify business cycles.
  - During the current down-cycle of oil prices, the economy faced a broad-based materialization of credit risk as a result of the economic downturn.
  - The indirect impact seems significant, even though the direct impact of low oil prices on the oil and gas industry and the banking system is limited.

*Source: IMF staff analysis in the provided content unit.*

### 16. CBR currently does not have a comprehensive set of macroprudential tools. Russian

### 16. CBR currently does not have a comprehensive set of macroprudential tools. Russian

### Legal and operational limitations of CBR’s macroprudential toolkit
- Russian legal practice requires that provisions for prudential tools (mostly, microprudential in nature) need to be rather explicit, with sufficient details in the CBR Law.
- The CBR Law currently only prescribes a limited number of macroprudential tools (see Appendix Table 3), and does not provide a legal foundation for CBR to use the full set of commonly recognized macroprudential tools, such as limits on LTV and DSTI ratios, as well as limits on the growth of particular credit segments.
- Some prudential tools in the context of Basel III are available (such as leverage ratios and NSFR), but they have not yet been implemented.
- Essentially, prudential requirements must be prescribed explicitly in law. The power to set rules for the conduct of banking businesses (Article 4 of the CBR Law) does not allow CBR to freely implement all prudential rules. However, provisions regarding prudential requirements can be quite flexible, as illustrated by the case of liquidity requirements (see Footnote 8).
- Term deposits feature minimal breakage fees.15 16

### Banking sector performance and credit developments (summary observations)
- Private Sector Domestic Credit, 1994−2015 (Credit extended by domestic banks in percent of GDP): charted actual and trend (based on third-order polynomial function) for period 1994Q4 to 2015Q4.
- Domestic Banks: Contribution to Total Assets Growth, 2009−15 shown by components: Non-lending activity, Lending to credit institutions, Lending to individuals, Lending to organizations (2009–2015 series).
- Domestic Banks: Leverage, 2009−15: series include Regulatory capital to risk-weighted assets and Equity to total non-interbank claims (dates: 2009Q3, 2011Q1, 2012Q3, 2014Q1, 2015Q3).
- Domestic Banks: Liquidity and Funding, 2009−15: indicators include Liquid assets to short-term liabilities (left scale), Resident deposits to domestic credit (left scale), Liquid assets to total assets (right scale).
- Domestic Banks: Reliance on Central Bank's Funding, 2009−15: Gross liabilities and Net liabilities (In percent of total non-interbank claims).
- Domestic Banks: Asset Quality and Buffers, 2009−15: Nonperforming loans (in percent of total loans; left scale) and Nonperforming loans net of specific provisions (in percent of regulatory capital; right scale).
- Sources: Haver Analytics; IMF, International Financial Statistics, Financial Soundness Indicators database, and World Economic Outlook database; and IMF staff estimates.

### Recommendations: macroprudential policy design and calibration
- Using macroprudential tools to establish adequate buffers could help safeguard financial stability in the medium term.
  - Greater volatility driven by oil price movements may warrant a larger buildup of capital buffers to protect banks against solvency risk as a result of a broad-based materialization of credit risk during the oil price down-cycle following a robust credit expansion during the up-cycle.
  - These capital buffers could be implemented in the context of the CCB or the Pillar 2 under the Basel capital framework, the latter potentially in the context of the internal capital adequacy assessment process (ICAAP).
  - Stress testing could be used to determine the capital buffers needed to withstand a sharp decline in oil prices and its macrofinancial consequences.
  - Liquidity tools could be employed to help contain excessive credit growth by ensuring that banks are able to raise their own funds to sustainably support their balance sheet expansion.
- Calibration of the CCB would benefit from a wider set of relevant indicators to properly evaluate the credit cycle.
  - The credit-to-GDP gap analysis for Russia is generally challenging given ongoing financial deepening and the sensitivity of the economy and the financial sector to oil prices.
  - Additional indicators of overall leverage and liquidity (for example, private sector indebtedness and leverage; LTV and DSTI ratios associated with mortgage and commercial real estate lending; and banks’ reliance on noncore funding) could be useful.17
  - The credit cycle analysis should account for the role of oil prices, which could significantly influence potential output and procyclically drive domestic demand and credit.
- Prudential liquidity requirements could be strengthened to improve banks’ funding structure over time.
  - There seems to be a scope to tighten liquidity ratios (that is, the N2, N3 and N4 ratios) to encourage banks to maintain adequate high-quality liquid assets to meet potential funding outflows and to strengthen their funding structure to rely less on short-term funds.
  - While CBR’s liquidity facilities can effectively backstop banks’ liquidity shortages, adjustments in CBR’s operations framework should be made to ensure appropriate risk pricing.
  - The structure of the CLF should be changed to incentivize banks to manage liquidity risk on their own.
- Macroprudential tools could support de-dollarization, but their use should be motivated primarily by systemic risk mitigation.
  - Country experiences suggest that de-dollarization process is more successful when the appropriate incentives and preconditions are in place, with two-way exchange rate flexibility among the most important.18
  - Macroprudential tools could be used to address foreign-currency liquidity risk and ensure appropriate risk pricing for foreign-currency exposures, while also supporting the effort to de-dollarize the economy.
  - Adequate attention should be paid to unintended consequences, as policy leakages could be acute, making it more difficult to monitor risks.19
  - Given that the corporate sector appears to have natural hedges against exchange rate risk, provision of foreign-currency loans should not be prohibited outright. Instead, CBR should opt for a microprudential approach that fosters banks’ underwriting standards (that is, to lend only to individuals and entities with foreign-currency revenues).

### Legal reform and toolkit expansion
- CBR needs to be equipped with a more comprehensive set of macroprudential tools.
  - The CBR Law should be amended to provide an adequate legal foundation for the development and use of the full range of macroprudential tools on an ex-ante basis (Appendix Table 3 provides a list).
  - An expanded toolkit is necessary as there is no conclusive evidence that stricter bank capital risk weights or provisioning requirements are sufficient on their own.
  - The ability to more effectively constrain the growth of risky lending would help CBR better contain systemic risk.
  - It would be useful to explore whether a fairly flexible provision in the CBR Law would be consistent with the Russian legal tradition, as this would enable CBR to respond more nimbly to various types of emerging systemic risk.20
  - One possibility is to outline broad characteristics of a tool together with its purposes. For example, CBR could regulate the “liquidity buffer requirement” to ensure that banks hold adequate liquid assets to cover potential funding outflows. Such a requirement would enable CBR to prescribe the amount of liquid assets in relation to banks’ balance sheet structure in implementation regulations.

### Institutional arrangements: current situation and assessment
- Current situation
  - Financial stability oversight responsibilities are shared between CBR and the FSC, with CBR in charge of conducting macroprudential policy.
  - The FSC has served as an advisory body that is (i) responsible for conducting systemic risk monitoring and assessment and (ii) able to make recommendations to government bodies and CBR to take measures to restore financial stability.
  - CBR, as the single financial regulator and supervisor, has naturally become a macroprudential authority, with complete responsibilities and powers deriving from its regulatory and supervisory functions for all regulated aspects of the financial system (that is, institutions, markets and infrastructures).21
  - The FSC was created in July 2013 (replacing the earlier Working Group to Monitor Financial Market Conditions) and was strengthened in February 2015 to become a high-level inter-agency committee chaired by the First Deputy Prime Minister and comprising senior officials including the CBR Governor, Minister of Economic Development, Minister of Finance, and DIA General Director.22 23 24
  - The FSC functions mainly as an advisory body that facilitates inter-agency information exchange; it can request necessary information from government bodies, CBR, and other organizations, but had neither permanent committee structures nor a supporting secretariat initially.
  - CBR has strengthened its macroprudential oversight function, including the establishment of the Financial Stability Department in 2011, publication of upgraded Financial Stability Review biannually since 2012, and the creation of the FSCom in 2014.
  - CBR has no exclusive decision-making body for macroprudential policy and uses the FSCom as the main internal coordination platform. The CBR Board is responsible for all key decisions, including monetary policy and financial regulation; the FSCom is chaired by the CBR Governor and includes four First Deputy Governors responsible for financial stability, monetary policy, banking oversight, and NBFI and market oversight.25 26 27 28
  - CBR has broad powers to obtain data for macroprudential oversight, including compiling banking and monetary statistics, balance of payments statistics, and the financial account component of the national account statistics. CBR is the competent authority responsible for exchanging information with foreign counterparts and has a special arrangement to obtain financial information from significant nonfinancial corporates on a confidential basis.
- Assessment
  - The current institutional arrangements appear to function well; CBR is well-placed to perform the macroprudential oversight function in Russia and has already built a track record in this area.
  - The current arrangements strike a balance between CBR’s prominent role in macroprudential policy and high level inter-agency coordination.
  - Effective coordination within CBR has been instrumental in identifying and mitigating systemic risk; the FSCom has played the central role in coordinating macroprudential oversight within CBR especially at the top management level.
  - The FSC has served as a useful platform for inter-agency coordination. With its strengthened membership (after February 2015), the FSC has become a forum that gives high level policymakers opportunities to exchange views on a wide range of issues related to financial stability, helps expedite the process of legislative changes needed to maintain financial stability,31 and enables CBR to take account of external views.

*Source: IMF staff report (excerpts provided in the supplied content).*

### 30. There is some room for further improvement in CBR’s macroprudential policy

### 30. There is some room for further improvement in CBR’s macroprudential policy

### Institutional arrangements and governance: assessment and key findings
- The current institutional arrangements "have not yet been fully tested, especially in a situation that calls for strong macroprudential actions."  
- The CBR Board "may face difficult choices in pursuing multiple policy objectives."  
- The trade-off between price stability and financial stability "remains to be more clearly defined" to ensure proper coordination of macroprudential and monetary policy tools.  
- Interactions with other policies "remain to be further elucidated, with appropriate governance structures."  
- The FSC, in its current setup, is performing its intended role as an advisory body; decision-making based on consensus is seen as suitable given the FSC is primarily a forum to exchange views.  
- The strong representation of CBR (Governor and four First Deputy Governors) in the FSC allows fruitful discussion of financial stability issues; participation of the First Deputy Prime Minister (as chair) and of an Assistant to the President helps ensure top policymakers are well-informed.  
- The FSC "does not have a formal reporting requirement."  
- Accountability and public communication: CBR communicates via Financial Stability Review and press releases, including on changes in macroprudential measures; consideration could be given to "better documenting and more fully disclosing the decision-making process."  
- Table 2: strengths and weaknesses (selected):
  - Inter-agency coordination: "Adequate and effective coordination is achieved through the FSC."
  - Autonomy: "CBR is solely responsible for conducting macroprudential policy (general consensus)." CBR’s autonomy is ensured given FSC’s consensus-based decision-making.
  - Governance: "CBR has multiple policy objectives, with the CBR Board responsible for making all key decisions." Complicated policy tradeoffs could arise; relationship between price stability and financial stability objectives not clearly defined.
  - Accountability: "Accountability could be complicated by the need to achieve multiple policy objectives." Publication of Financial Stability Review provides a certain degree of policy transparency.

### Recommendations on institutional framework and governance
- Maintain the FSC as an advisory body, but clarify its scope to ensure CBR’s autonomy:
  - Explicitly establish that the FSC does not have authority to override CBR decisions on use of macroprudential tools.
  - Recognize potential overlap: the FSC’s mandate to review identification methodology and the list of SIFIs appears to overlap with CBR responsibilities.
  - In principle, CBR could be responsible for identifying SIFIs, but a formal consultation process with the government is needed in light of potential government financial support to SIFIs.
  - Current FSC membership is appropriate for systemic risk monitoring and assessment, but may be less suited for crisis management.
- Keep CBR in charge of conducting macroprudential policy, and consider steps to ensure timely macroprudential actions:
  - In the near term, formalize regular CBR Board meetings to discuss systemic risk issues and publication of assessments, under a more formalized arrangement similar to monetary policy. Note: such meetings would be held "at least every quarter," some coinciding with Financial Stability Review publication and/or calibration of the CCB.
  - In the medium term, enhance governance and accountability through institutional changes; options include:
    - Amend the CBR Law to provide a well-prescribed financial stability framework and an explicit mandate "to maintain stability of the entire financial system (institutions, markets and infrastructures)."
    - Establish a dedicated policymaking committee within CBR to conduct macroprudential policy (for example, a "Financial Policy Committee" (FPC)) with appropriate objectives, functions, and powers. The FPC would:
      - Be responsible for systemic risk monitoring and assessment and for decisions on policy measures needed to safeguard financial stability, which authority over tools commonly used to mitigate systemic risk.
      - Be assigned power to make recommendations to other CBR committees to undertake necessary actions, including adjustments of other prudential tools that are microprudential in nature.
    - The FPC could replace the existing FSCom; essentially an upgraded FSCom with policymaking responsibility and associated governance and accountability provisions.
    - Consider a broader scope for the committee (for example, liquidity provision beyond normal monetary operations and oversight of payment systems).
  - Enhance accountability through greater transparency:
    - In addition to Financial Stability Review publication, publish records of the committee’s meetings summarizing key decisions in risk assessment and policy.
    - Make warnings and recommendations issued by the committee public. Warnings are "soft powers" and recommendations are "semi-hard power" possibly through a comply-or-explain mechanism.
    - Record views of committee members in a minority, analogous to current practice for CBR Board monetary policy decisions (minority opinions are recorded in meeting minutes, though not publicly disclosed).

### Technical capacity for systemic risk monitoring and assessment: overview and assessment
- Macroprudential surveillance at CBR is primarily the responsibility of the Financial Stability Department; scope covers overall financial soundness of banks, NBFIs and significant nonfinancial corporates, financial market developments, and credit and liquidity risks of the banking system.  
- CBR has developed a systemic risk dashboard to help identify and prioritize risks; other departments (e.g., Banking Supervision Department) carry out stress testing. CBR "has regularly conducted solvency and liquidity stress tests" to assess banks’ resilience to macroeconomic scenarios and liquidity pressures.  
- CBR has necessary technical capacity, but additional development is desirable. Key analytical capacity gaps identified:
  - Early warning system to detect underlying vulnerabilities:
    - The systemic risk dashboard is effective for market and banking monitoring, but an early warning system would enhance detection of medium-term crisis vulnerabilities.
    - The early warning system should assess vulnerabilities in nonfinancial sectors (for example, corporate, household, fiscal, and external) and conditions in financial and real estate markets (for example, price misalignments).
  - Integrated stress testing capacity:
    - Develop an integrated stress testing system that accounts for second-round effects, solvency-liquidity links, and cross-sectoral interconnectedness.
    - Design stress scenarios supported by a macrofinancial model that accounts for external sector developments (for example, global financial conditions, commodity prices, and developments in main trading partners) and domestic macrofinancial linkages (for example, dollarization, real estate market, and oil-related spillovers).
  - Focus on "connecting the dots" to make system-perspective assessments:
    - How large capital buffers need to be to deal with systemic risk while considering banks’ asset quality and lending capacity.
    - How monetary policy and operations affect assessment of banking system vulnerabilities, particularly in view of the 2011–14 experience.
    - How to assess overall liquidity risk given banks’ reliance on short-term funding, CBR liquidity provision, and interbank market fragmentation.
- Data access and gaps:
  - CBR generally has access to standard financial soundness indicators and supervisory data from regulated financial institutions.
  - CBR receives detailed financial information from significant nonfinancial corporates on a confidential basis and has granular mortgage and consumer lending data.
  - Gaps: CBR lacks some information to fully assess indebtedness and leverage of different sectors and to conduct comprehensive corporate and household balance sheet assessments. CBR may not have complete data on certain shadow banking activities (for example, leasing), "part of which could lie outside CBR’s regulatory perimeter."

### Recommendations on technical capacity, data, and communication
- Strengthen technical capacity priorities:
  - Early warning exercise:
    - Conduct an early warning exercise to form a comprehensive view on financial stability risks and incorporate underlying weaknesses flagged by the early warning system.
    - Use the exercise to help calibrate macroprudential measures targeted at particular segments.
  - Macroprudential stress testing:
    - Conduct stress testing for macroprudential surveillance purposes (with no supervisory actions necessarily adopted based on stress test results).
    - Develop an integrated macrofinancial stress testing framework that accounts for second-round effects, solvency-liquidity links, and cross-sectoral interconnectedness.
  - "Connecting the dots":
    - Ensure macrofinancial linkages and feedback loops between real and financial sectors are captured in assessments.
- Expand information on corporate and household balance sheets:
  - Develop capacity to compile flow of funds statistics.
  - Arrange to receive corporate financial statements for a broader set of companies.
  - Conduct a survey on household finance.
  - Closing data gaps is important, especially those arising from unregulated financial activities (such as leasing) and cross-sectoral and cross-border financial operations.
- Improve Financial Stability Review content and communication:
  - Convey key messages more clearly to the general public by highlighting main systemic risks and vulnerabilities up front, possibly based on an early warning exercise and using a risk assessment matrix.
  - Include a financial stability map to depict changes in multifaceted risks and vulnerabilities.
  - Focus discussion on how risks may be amplified by existing vulnerabilities and propagate through macrofinancial linkages, and whether the financial system has adequate buffers to withstand envisaged risks (drawing on stress testing as needed).
  - Discuss policies for safeguarding financial stability.
  - Records of committee meetings and minority views should be published to enhance policymaking transparency.

*Source: IMF staff assessment as presented in the chapter titled "There is some room for further improvement in CBR’s macroprudential policy" (Content unit: _cr16307 - 30).*

### Appendix Table 1. Progress on Strengthening Macroprudential Policy Institutional

### Appendix Table 1. Progress on Strengthening Macroprudential Policy Institutional Arrangements Since the Last FSAP

### Institutional timeline and developments
- December 2010: The Working Group to Monitor Financial Market Conditions (inter-agency, under the Presidential Council) was created. Mandates:
  - (i) identify mechanisms to monitor the state of the financial market and SIFIs;
  - (ii) propose the legal amendments needed for the establishment of these mechanisms.
  - Chaired by a Deputy Minister of Finance; comprises representatives from CBR, the FSFM, the MOED and the MOF, among few other agencies.
- March 2011: The Financial Stability Department was established in CBR.
- July 2013: The FSC was created, replacing the Working Group to Monitor Financial Market Conditions. FSC responsibilities:
  - (i) conducting systemic risk monitoring and assessment;
  - (ii) reviewing the methodology for identifying SIFIs and the list of SIFIs;
  - (iii) proposing measures to maintain financial stability.
  - The FSC can make recommendations to government bodies and CBR. Chaired by the Minister of Finance, with broad and diverse membership.
- September 2013: CBR became an integrated financial oversight authority after the merger of the FSFM into CBR (oversight for banks, NBFIs and financial markets).
- November 2014: The FSCom, a high-level internal committee within CBR, was established. FSCom responsibilities:
  - (i) conducting systemic risk monitoring and assessment;
  - (ii) evaluating sustainability of systemically important FMIs;
  - (iii) assessing financial soundness of significant nonfinancial corporates and their risks;
  - (iv) reviewing draft Financial Stability Review.
  - FSCom can make recommendations to the CBR Board, Banking Supervision Committee, Financial Supervision Committee and Monetary Policy Committee of CBR; chaired by the CBR Governor.
- February 2015: FSC strengthened (membership); FSC chaired by the First Deputy Prime Minister and comprises the CBR Governor, Minister of Economic Development, Minister of Finance and DIA General Director, and senior officials. FSC can make (non-public) recommendations on a comply-or-explain basis to government bodies and CBR. Secretariat established (staff from CBR, the First Deputy Prime Minister’s Office, and the MOF).
- February 2015: The MOED and the MOF were designated as the government bodies responsible for ensuring financial stability.

### Key institutional features and mandates
- FSC: systemic risk monitoring, SIFI identification methodology review, policy recommendations (comply-or-explain basis, non-public).
- CBR: integrated oversight role for banks, NBFIs, and financial markets; internal FSCom for systemic risk and FMIs.
- Secretariat arrangements: cross-agency staffing including CBR, First Deputy PM’s Office, MOF.

---

### Appendix Table 2. Timeline of Macroprudential Measures Since 2006

### Differentiated reserve requirement (selected entries)
- October 2006: Reserve requirement on liabilities to nonresident banks in all currencies increased to 3.5 percent (from 2 percent). (Introduced at 2 percent in August 2004.)
  - At that time, reserve requirements on individual deposits in local currency and on other deposits were at 3.5 percent (since July 2004).
- July 2007: Reserve requirement on liabilities to nonresident banks in all currencies increased to 4.5 percent.
  - Reserve requirements on individual deposits in local currency and on other deposits raised to 4 and 4.5 percent, respectively.
- October 2007: Reserve requirement on liabilities to nonresident banks in all currencies decreased to 3.5 percent.
  - Reserve requirements on individual deposits in local currency and on other deposits lowered to 3 and 3.5 percent, respectively.
- January 2008: Reserve requirement on liabilities to nonresident banks in all currencies increased to 4.5 percent.
  - Reserve requirements on individual deposits in local currency and on other deposits raised to 4 and 4.5 percent, respectively.
- March 2008: Reserve requirement on liabilities to nonresident banks in all currencies increased to 5.5 percent.
  - Reserve requirements on individual deposits in local currency and on other deposits raised to 4.5 and 5 percent, respectively.
- July 2008: Reserve requirement on liabilities to nonresident banks in all currencies increased to 7 percent.
  - Reserve requirements on individual deposits in local currency and on other deposits raised to 5 and 5.5 percent, respectively.
- September 2008 (From 1st): Reserve requirement on liabilities to nonresident banks in all currencies increased to 8.5 percent.
  - Reserve requirements on individual deposits in local currency and on other deposits raised to 5.5 and 6 percent, respectively.
- September 2008 (From 18th): Reserve requirement on liabilities to nonresident banks in all currencies decreased to 4.5 percent.
  - Reserve requirements on individual deposits in local currency and on other deposits lowered to 1.5 and 2 percent, respectively.
- October 2008: Reserve requirements uniformly reduced to 0.5 percent.
  - Subsequently raised to 1 percent in May 2009, to 1.5 percent in June 2009, to 2 percent in July 2009, and to 2.5 percent in August 2009.
- February 2011: Reserve requirement on liabilities to nonresident legal entities in all currencies increased to 3.5 percent. Reserve requirement on deposits raised to 3 percent.
- March 2011: Reserve requirement on liabilities to nonresident legal entities in all currencies increased to 4.5 percent. Reserve requirement on deposits raised to 3.5 percent.
- April 2011: Reserve requirement on liabilities to nonresident legal entities in all currencies increased to 5.5 percent. Reserve requirement on deposits raised to 4 percent.
- March 2013: Reserve requirements uniformly imposed at 4.25 percent.
- April 2016: Reserve requirement on liabilities in foreign currency, except individual deposits, increased to 5.25 percent. Reserve requirement on other liabilities remained at 4.25 percent.
- August 2016: Reserve requirement on liabilities in foreign currency increased to 6 percent for individual deposits and 7 percent for other liabilities. Reserve requirement on liabilities in ruble raised to 5 percent.

### Provisioning
- June 2009: Loan classification and provisioning requirement eased (in response to a banking crisis). Restructured loans allowed to remain in the original classification.
- March 2013:
  - Minimum provisions for newly extended unsecured consumer loans increased to 2 percent for loans without overdue payments (from 1 percent) and to 6 percent for loans with overdue payments for no more than 30 days (from 3 percent).
  - Tighter provision requirements applicable only if borrowers did not have deposit accounts with the banks.
  - Unsecured consumer loans with overdue payments for more than 360 days must be fully provisioned (that is, 100 percent).
- January 2014: Minimum provisions for newly extended unsecured consumer loans increased to 3 percent for loans without overdue payments and to 8 percent for loans with overdue payments for no more than 30 days. Applicable only if borrowers did not have deposit accounts with the banks.
- December 2014: Loan classification and provisioning requirement eased (to increase flexibility in the management of credit risk).

### Sectoral capital risk weights (selected changes)
- May 2009: Risk weight for relatively low-risk newly extended mortgage loans in ruble reduced to 0.7 (from 1). Requirements:
  - Size of loans is less than RUB 50 million.
  - LTV ratio is less than 70 percent; DSTI ratio is less than 33⅓ percent.
  - Property used as collateral must be insured for an amount of at least the size of loans.
- October 2011: Risk weight for relatively high-risk newly extended mortgage loans in ruble increased to 1.5 (from 1). Requirements:
  - Size of loans is more than RUB 50 million.
  - LTV ratio is more than 80 percent.
- July 2013: Risk weights for newly extended unsecured consumer loans increased based on risk profiles:
  - Loans in local currency:
    - Risk weight of 1.1 for loans with effective lending rates of 25–35 percent
    - Risk weight of 1.4 for loans with effective lending rates of 35–45 percent
    - Risk weight of 1.7 for loans with effective lending rates of 45–60 percent
    - Risk weight of 2 for loans with effective lending rates of more than 60 percent.
  - Loans in foreign currency:
    - Risk weight of 1.7 for loans with effective lending rates of 20–25 percent
    - Risk weight of 2 for loans with effective lending rates of more than 25 percent.
- January 2014: Risk weights for newly extended unsecured consumer loans increased based on risk profiles:
  - Loans in local currency:
    - Risk weight of 3 for loans with effective lending rates of 45–60 percent
    - Risk weight of 6 for loans with effective lending rates of more than 60 percent.
  - Loans in foreign currency:
    - Risk weight of 3 for loans with effective lending rates of 20–25 percent
    - Risk weight of 6 for loans with effective lending rates of more than 25 percent.
- May 2014: Criteria for mortgage loans subject to the risk weight of 0.7 changed:
  - DSTI ratio is less than 50 percent (previously, 33⅓ percent); other criteria remain unchanged.
- December 2014: Risk weight for relative low-risk newly extended mortgage loans in ruble further reduced to 0.5. Requirements:
  - Size of loans is less than RUB 50 million.
  - LTV ratio is less than 50 percent; DSTI ratio is less than 40 percent.
  - Property used as collateral must be insured for an amount of at least the size of loans.
- January 2015: Risk weight for relatively high-risk newly extended mortgage loans in ruble increased to 1.5 (from 1). Requirement:
  - LTV ratio is more than 90 percent.
- February 2015: Risk weight for newly extended unsecured consumer loans reduced to 1. Loans must have:
  - In local currency with effective lending rates of 25–35 percent.
- April 2015: Risk weight for newly extended mortgage loans in foreign currency increased to 3 (from 1).
- August 2015: Risk weight for newly extended unsecured consumer loans increased to 3. Loans must be:
  - In foreign currency with effective lending rates of less than 20 percent.
- January 2016: Risk weight for relatively low-risk newly extended mortgage loans in ruble further reduced to 0.35. Requirements:
  - Size of loans is less than RUB 50 million.
  - LTV ratio is less than 50 percent; DSTI ratio is less than 33⅓ percent.
  - Property used as collateral must be insured for an amount of at least the size of loans.
- May 2016: Risk weights for new exposures to legal entities in foreign currency increased to 1.1-1.5 (from 1), depending on transaction types and investment purposes. Main features:
  - Risk weight for abovementioned foreign-currency exposures (both loans and debt securities) would be at least 1.1, except for exposures to corporates with sufficient foreign-currency earnings for debt servicing and exposures that are guaranteed by the government.
  - Risk weight for foreign-currency lending for purchasing commercial real estate would be 1.3.
  - Risk weight for foreign-currency debt securities held in certain securities depositories would be 1.5.

- Footnote: For calculating the DSTI ratio, income of spouse and children is also included.

---

### Appendix Table 3. Macroprudential Tools Available to CBR

### Tools dealing with broad-based credit risk
- Countercyclical capital buffer: √
- Leverage ratio: √
- Dynamic/general provisioning requirement: √
- Limit on growth of overall credit: ×
  - Could be a cap on lenders’ exposures (hard) or on the share of lenders’ exposures (soft)

### Tools dealing with credit risk from the household sector
- Sectoral capital requirement: √
  - Higher capital requirements for unsecured consumer (since July 2013)
  - Differentiated capital requirement for mortgage lending (since October 2013)
  - Higher capital requirement for certain foreign-currency exposures (forthcoming)
- Sectoral provisioning requirement: √
  - Higher provisioning requirement for unsecured consumer lending (since March 2013)
- Limit on growth of certain credit: ×
  - Could be a cap on lenders’ exposures (hard) or on the share of lenders’ exposures (soft)
- Limit on LTV ratio, DSTI ratio, or debt-to-income (DTI) ratio: ×
  - Could be a cap on lenders’ exposures (hard) or on the share of lenders’ exposures (soft)
  - Commonly used for collateralized lending
  - Limit on DTI ratio is also applicable for unsecured lending.
- Amortization requirement: ×

### Tools dealing with credit risk from the corporate sector
- Sectoral capital requirement: √
  - Higher capital requirement for certain foreign-currency exposures (forthcoming)
- Sectoral provisioning requirement: √
- Limit on growth of certain credit: ×
  - Could be a cap on lenders’ exposures (hard) or on the share of lenders’ exposures (soft)
- Limit on LTV ratio or debt service coverage (DSC) ratio: ×
  - Commonly used for collateralized lending (for example, commercial real estate)

### Tools dealing with liquidity risk
- Liquidity buffer requirement: √
  - To ensure adequate holding of liquid assets to cover potential funding outflows (for example, LCR requirement)
  - Broad legal basis seems to exist; N2 ratio, N3 ratio, and LCR in place
- Stable funding requirement: √
  - To ensure adequate use of stable liabilities to fund illiquid assets (for example, NSFR requirement and limit on loan-to-deposit ratio)
  - Broad legal basis seems to exist; N4 ratio and NSFR in place
- Liquidity levy: ×
  - To reduce reliance on non-core funding (potentially differentiated by maturity, currency and source)
- Reserve requirement: √
  - To reduce reliance on some funding types such as nonresident or foreign-currency funding
  - Higher reserve requirement on certain foreign-currency liabilities (since April 2016)
- Limit on open foreign-exchange position: √
  - To contain foreign exchange risk
- Outright limit on foreign-currency funding: ×
  - To reduce reliance on certain foreign-currency funding (for example, caps on foreign-currency liabilities, external borrowing, or FX derivative position)

### Tools for managing market liquidity risk
- Market liquidity risk tools: ×
  - For example, margin requirement for securities lending transactions and restriction on redemptions

### Tools dealing with structural risk
- Capital surcharge on SIFIs: √
- Higher loss absorbency requirement: ×
  - For example, TLAC requirement for global SIBs and MREL for banks in the European Union
- Limit on certain exposures: √/×
  - To limit concentration risk (large exposures of a particular lender and common exposures of lenders)
  - Limit on large exposures in place
- Structural limit on certain activities: ×
  - For example, Liikanen, Vickers and Volcker rules

- Footnotes:
  - The list of commonly used macroprudential tools is based on IMF (2014).
  - The symbol √ indicates existence of the legal basis, while the symbol × indicates no legal basis.

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### Appendix Table 4. Progress in Meeting the FSB Peer Review Recommendations on Strengthening the Macroprudential Policy Framework

### Recommendations and progress
- Recommendation: The authorities should clarify the role and responsibilities of the FSC in the macroprudential policy framework in order to eliminate potential overlaps in mandates and responsibilities with CBR.
  - Progress: None.
- Recommendation: In order to enhance the effectiveness of the FSC, the authorities should consider:
  - (1) upgrading the role of CBR in the FSC, given its financial stability mandate and technical expertise on prudential matters;
  - (2) developing formal structures to carry out its mandated tasks;
  - (3) providing the FSC with the power to issue recommendations to public sector authorities on a comply-or-explain basis;
  - (4) adopting a majority voting system for its decisions; and
  - (5) exploring options to publicly communicate its deliberations and decisions.
  - Progress:
    - Membership of the FSC was strengthened, including participation of the CBR Governor.
    - The FSC can make recommendations on a comply-or-explain basis to government bodies and CBR.
    - The secretariat was established, comprising staff from CBR, the First Deputy Prime Minister’s Office, and the MOF.
- Recommendation: CBR should review the mandate of its FSCom to ensure that it addresses all aspects of macroprudential policy decision making, including coordination on policy measures for systemically important financial institutions and the development of proposals on the use of tools for macroprudential purposes.
  - Progress: None.
- Recommendation: CBR should enhance its systemic risk analysis to identify and prioritize risks so that it becomes more policy-oriented and can support decision-making for macroprudential purposes.
  - Progress: CBR has developed a systemic risk dashboard and is working on identifying early warning indicators.
- Recommendation: The authorities should consider amending the CBR Law to provide an adequate legal foundation for the development and use of a comprehensive macroprudential toolkit on an ex-ante basis.
  - Progress: None.

*Source: _cr16307 - Appendix Table 1. Progress on Strengthening Macroprudential Policy Institutional (IMF).*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2016/_cr16307.pdf_