Central Bank of Russia plans to increase requirements for banks' minimum capital approximately by level of inflation accumulated since 2018 - Nabiullina

MOSCOW. March 5 (Interfax) - The Central Bank of Russia plans to increase the requirements for the minimum capital of small banks by approximately the level of inflation accumulated since 2018, when the current regulations were established, CBR Governor Elvira Nabiullina said at the annual meeting of credit institutions with the Central Bank.

"I know that some small banks are also concerned about whether they will be able to increase capital in the current conditions. But I want to emphasize that we intend to make this increase gradually over several years. And according to our estimates, the vast majority of players will not be affected by this innovation, as their capital already exceeds our targets for minimum capital requirements. Those who are affected by this will be able to increase capital through profits, recapitalization, and in extreme cases, change their license type. There will be enough time for this," Nabiullina said.

In the near future, the regulator will prepare a consultative report and discuss the details of the new requirements with the banking community.

Capital requirements for credit institutions in Russia have not changed since 2018. For banks with a basic license, the minimum threshold is 300 million rubles; for banks with a universal license it is 1 billion rubles. Previously, Nabiullina said that these figures are less in line with the needs of the economy.

The head of the Central Bank's banking regulation and analytics department, Alexander Danilov, said on the sidelines of the annual meeting that the regulator could give banks up to five years to meet the new minimum capital requirements.

He said indexing capital to inflation since 2018 could approximately double the minimum amount.

"We're saying it will be feasible for most of them, and most of them are already complying. At first, a lot of them were capitalized more and earned a profit. And for those who are currently not complying, we will draw up a five-year schedule - again, the deadline is still preliminary - so that they can easily make a profit if they're going to capitalize it. And for those who can't, there's the issue of either recapitalization on the part of shareholders, or a change in the license format. That's not the end of the world either," Danilov said.

He said the increase in capital requirements is unlikely to seriously activate the consolidation process in the banking market.

"It's likely to some extent. To say that this will be such a driver and everyone will rush into consolidating is probably not the case, again because, as I said, most are already complying. But for some, it will probably be a further argument to partner with someone. But this is not the only argument for partnership, because there are other arguments for this, perhaps even bigger ones. For example, the opportunity to act as an association and bargain for the best conditions for IT solutions, in particular the digital ruble. Or from the point of view of lending to some large clients, because when you are one bank, you may simply be uninteresting to large companies, since you cannot meet their financing needs. And if you act on behalf of an association, then you, as a group of banks, can provide the necessary amount of financing," Danilov said.