Everything on stress testing: Bank a closer look to the big banks

© RIA Novosti / Natalia to Seliverstova in photobacteria Central Bank of Russia. Archival photoEverything on stress testing: Bank a closer look to the big banks© RIA Novosti / Natalia to Seliverstova the image Bank

Recent developments in the Russian banking market has proved so resonant, that demanded clarification of the head of the Bank of Russia Elvira Nabiullina, who assured the banking community that the situation is under control and the regulator will not weaken the control over the sector, and in some cases even increase.

Speaking at the banking forum of the Association «Russia» in Sochi, the Chairman of the Central Bank explained why the Bank «Ugra» has not been possible to save, and the Bank «Opening» has got a chance to continue working.

Of the Central Bank in late August announced measures to rescue the Bank «FC Opening», until recently, the former largest private Bank in Russia. This will be the first rehabilitation using a new mechanism — the Bank of Russia, investing established in the year of the Foundation of the consolidation of the banking sector will become the main shareholder of «Discovery». In 2018, the Bank will be headed by Mikhail Zadornov, the outgoing head of «VTB 24».

Insurance case with the Bank «Ugra», which was part of the top 30 largest Russian banks, which the Central Bank since July 28, revoked the license, was the largest for the period of clearing the banking system of the Russian Federation. DIA has estimated the total amount of payments to 169,2 billion.

«The question is often asked why the «Yugra» has revoked the license, and «Discovery» is sanitized. The first «Ugra» is not a systemically important Bank, «Opening» is, it is one of the largest banks in the country,» she said. The situation in the «Discovery» affects many banks in Russia, as well as on pension funds and insurance companies, unlike the Bank «Ugra», which even in the case of a capital increase would not be viable, said Nabiullina.

The credit portfolio of the Bank «Ugra» was low quality, and most of the mortgage collateral was decorated with signs of overvaluation. Proposed by the owners of the rescue plan did not meet the requirements of the legislation and, indeed, assumed long-term ten-year government subsidies, in fact, the business projects of the group of individuals in separate sectors. Therefore, the revocation of the license was the natural result of the actions of the owners and managers of the Bank, said the head of the regulator.

«With all the flaws and riskiness of the business model «Discovery», it can be treated, repaired and develop. Nevertheless, business failures in the «Discovery» led to the fact that the Bank could not on your own preserve financial stability and the Central Bank was forced to intervene,» — said Nabiullina.

That is, the banking business in Russia must be that of banking, not investment, the risks to the business owners and management of the credit organisations it is necessary to strictly limit, warned the head of the regulator.

«The risks to the business owners and management need a hard limit and not to try to deceive the regulator through the intricate scheme of ownership and informal agreements… If the owners of the banks want to engage in any other business, even if it is not financed from depositors’ funds in their own banks, and it turns out we have an asymmetric distribution of «inches» and «roots» — compared it.

«If the business is successful, the owners get richer, if not, then DIA must pay depositors of the indemnity. This approach, of course, is unacceptable,» — said Nabiullina.

«Until the end of the current year the Bank of Russia will conduct a complete assessment of the quality of the risk management and capital adequacy at the largest credit institutions. The Bank of Russia will evaluate the quality procedures of credit institutions, how they manage risk and how they plan the amount of capital that would allow banks to cover all accepted and potential risks, the volume of which should be determined taking into account stress-testing,» — said Nabiullina.

The head of the Central Bank of the Russian Federation stated that the regulator on the results of the stress tests of the largest banks can individually increase the requirements for the sufficiency of their capital.

«If we detect that the amount of available capital of the Bank is insufficient to cover assumed risks or insufficient level and quality procedures, risk management, and in the future the Bank may face a shortage of capital, then such organizations will be set higher individual requirements for capital adequacy. This is a fundamentally new system approach to Supervisory actions», — said Nabiullina.

Supervisory requirements will be established not after the fact, after the detection of the verification of the actual violations, and proactively, if the Central Bank stated low quality of risk management in credit institution. The Bank of Russia can apply serious measures of Supervisory response, for example, limitation and prohibition of certain operations in violation of the credit organisation individually established elevated standards, said the Chairman of the Central Bank.

«All other credit institutions will be subjected to such assessment the following 2018,» — said the head of the regulator.

According to the Central Bank of the Russian Federation on 1 September in Russia there are 576 banks, of which 44 are non-profit credit organizations (NCOs).