Banks may face a revised evaluation methodology under proposed bank stress testing regulations by the Central Bank.
The Bank of Russia has announced that it will be implementing annual stress tests for all banks in Russia, starting from 2028. These tests are designed to assess the capital adequacy of banks and will be an integral part of the Bank's internal procedures.
At the end of the third quarter each year, the Bank of Russia sends stress scenarios to major banks. The purpose of these scenarios is to simulate adverse economic conditions and test the banks' ability to withstand such situations. Banks are given six months to present a two-year forecast of their activities based on the provided stress scenario.
The results of the stress tests will be used in the Bank of Russia's internal procedures for assessing the capital adequacy of banks. The banks will be categorised into four groups based on their performance.
The first group includes banks that do not fall below the capital adequacy norm plus 1 percentage point as a result of the tests. These banks are considered to be in a strong position.
The second group includes banks that meet the capital adequacy norm. These banks are deemed to be in a satisfactory position.
The third group includes banks that fall below the norm but can eliminate the deficit. These banks will be closely monitored and may be required to take corrective actions.
The fourth group includes banks whose capital deficit in the event of a stress scenario cannot be eliminated. The Bank of Russia may take action against these banks, which could include imposing an additional capital surcharge or requiring them to take immediate corrective actions to improve their capital position.
The stress test results will also be a factor in the assessment of the overall economic position of banks. The size of contributions to the Deposit Insurance Fund will be determined based on the results of the stress tests. Banks that pass stress tests with high results may pay lower fees into the Deposit Insurance Fund.
The Bank of Russia will verify the forecasts and give an assessment based on which banks will be assigned to one of the four groups. The Bank will also consider a bank's ability to replenish funds if it passes the test with a capital deficit.
The Bank of Russia will take the results of the stress tests into account in its assessments and will consider unsatisfactory stress test results when evaluating the capital adequacy of banks. The stress test results may lead to the imposition of an additional capital surcharge on banks.
In summary, the Bank of Russia's annual stress tests are designed to assess the capital adequacy of banks and will be a crucial part of the Bank's internal procedures. The results of these tests will affect the assessment of the economic position of credit organizations and will be used to determine contributions to the Deposit Insurance Fund, as well as potentially impose additional capital surcharges on banks that perform poorly.
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