Page 57 - RusRPTJuly18

up from 4.2% in 2017, as funding costs decreased by 20bp, while loan yields were stable.
Excluding failed banks, the sector average total capital ratio at end-March was roughly stable at 14.7% , as lending growth was compensated by internal capital generation. All nine systemically important banks (SIBs, excluding the rescued Otkritie and PSB) had capital ratios above the minimum requirements, including buffers with reasonable cushions. Four of the sampled non-SIBs (Asian Pacific Bank, Moscow Industrial, Roscap and UBRIR) had capital ratios above the required minimums but breached the buffers.
All nine systemically important banks (excluding the rescued Otkriite and Promsvyaz) had capital ratios above the minimum requirement including conversation and systemic importance buffers (Core Tier 1 ratio of 7.025%, Tier 1 ratio of 8.525% and Total Capital ratio of 10.525%) with reasonable cushions. Non-systemically important banks' requirements including buffers are lower (Core Tier 1 ratio of 6.375%, Tier 1 ratio of 7.875% and Total Capital ratio of 9.875%). Four non-systemically important sampled banks (excluding failed lenders and those not reporting capital ratios at end-March) had capital ratios above the required minimums but below the requirements plus the buffers. These were Asian Pacific Bank, Moscow Industrial Bank, UBRIR and Roscap. An inability to meet buffer requirements on a consolidated level by the end of the quarter could lead to limitations on dividend payments, but would not represent grounds for a licence withdrawal. Uraltransbank remained in breach not only of the buffer but also of all three minimum capital ratios, which could result in regulatory intervention.
8.1.7 Banks specific issues
The Central Bank of Russia (CBR) might need an additional RUB100bn ($1.6bn) to set up a "bad bank” to hold distressed assets belonging to bailed out banks, adding to over $40bn the central bank has already spent, Reuters said on June 25 citing unnamed sources. The CBR under governor Elvira Nabiullina has waged a four-year banking sector clean-up culminating in 2017 with the bailouts of some of country's largest private banks such as Financial Corporation Otkritie, Binbank (aka B&N Bank), and Promsvyazbank (PSB). The regulator most recently announced that it will be singling out over RUB2 trillion of bad assets of ailed banks into a single "bad assets" fund , while merging FC Otkritie with BinBank, and designating PSB to become a state "defence bank" servicing the military and defence complex. Trust Bank, part of the Otkritie group, might now reportedly need RUB100bn in extra funds. Trust and Rost bank were previously flagged by analysts and unconfirmed reports as still riddled with liquidity and capital problems .
The Central Bank of Russia (CBR) is taking on one of the thorniest problems of the Russian banking sector and will tighten regulation on related party lending in the banking sector, Vedomosti daily said on June 24 citing internal regulator's regulation drafts. CBR officials have made a number of policy statements recently on retuning the regulations after a four-year banking sector clean-up effort . Crediting of related parties and high borrower concentration was one of the main problems of the large commercial banks that had to be rescued last autumn and curbing it is the CBR's top priority. The central bank will use the previously published criteria of degrees of "relation" with the borrowers to limit risks to certain clients or groups of clients at 25% of the capital. The criteria include joint participation in single project on which the repayment of the debt is contingent, over 50% of production infrastructure of
RUSSIA Country Report July 2018 www.intellinews.com