Page 79 - RusRPTAug23

The reserve of foreign currency liquidity, which amounts to 52bn US dollars, is also at an adequate level. It covers around 54% of customer funds and 29% of foreign currency obligations, maintaining a level similar to that of May.
Having sufficient liquidity reserves is crucial for banks to meet their financial obligations and ensure smooth operations. Adequate liquidity levels allow banks to respond to changing market conditions and meet customers' demands without facing cash shortages or disruptions in the banking system.
The ability to access liquidity from various sources, such as the central bank or the money market, enhances the stability of the financial system. Banks can use interbank lending and other instruments to manage their liquidity needs and maintain a balanced financial position.
The uneven distribution of liquidity reserves across sectors highlights the importance of diversifying funding sources for banks. By accessing the interbank market and other funding channels, banks can mitigate concentration risks and ensure a more resilient financial position.
CAPITAL: The financial sector's balance sheet capital experienced a notable increase in June, reaching 12.8 trillion rubles, with a substantial contribution from the sector's profit amounting to 314bn rubles. Additionally, some banks underwent dökaptializatsiya, resulting in an injection of approximately 100bn rubles into their capital reserves, predominantly through additional share issuance (L). However, the growth in balance sheet capital was somewhat tempered by the negative revaluation of subordinated instruments (-43bn rubles) and securities assessed at fair value through other comprehensive income (-27bn rubles) amid a weakening ruble exchange rate (-7%) and dividend payments (-31bn rubles).
Information regarding the regulatory capital dynamics in June will be available after the publication of this material. As of May 2023, the Common Equity Tier 1 (CET1) capital adequacy ratio (CAR) is expected to have decreased by 0.4 percentage points, reaching 12.21%. The decline in CET1 capital was primarily driven by a reduction in capital reserves (-2.9%), mainly attributable to a major bank's payment of record dividends amounting to 565bn rubles for the year 2022 (N).
In May, the available-for-sale reserves (AVR) registered a 0.4% increase, largely due to the growth of credit portfolios, notably in the corporate segment (+0.8%) and the mortgage sector (+2.2%).
The capital buffer as of May amounted to approximately 6 trillion rubles (O), reflecting a 6.7% decline within a month. This reduction indicates a potential reassessment of the capital positions and risk management strategies among banks as they adapt to evolving market conditions and regulatory requirements.
The financial sector's ability to bolster balance sheet capital through profits and dökaptializatsiya reflects its resilience and capacity to raise capital when needed. This additional capital provides a cushion against potential risks and shocks, contributing to the stability of individual institutions and the sector as a whole.
79 RUSSIA Country Report August 2023 www.intellinews.com