Russian Central Bank will not introduce countercyclical capital buffer in order not to harm corporate lending

MOSCOW. Sept 20 (Interfax) - The Central Bank of Russia (CBR), which last year announced the possibility of establishing a positive value in the countercyclical capital buffer, has revised its plans amid the altered economic conditions, and the regulator intends to maintain the buffer at zero, the CBR said in a statement.

The Basel III countercyclical capital buffer (CCyB) was introduced to improve the stability of the banking system. The buffer accumulates during periods of accelerated growth in the supply of credit and, accordingly, dissolves during periods of economic stress. The decision to dissolve the capital buffer during periods of uncertainty in the financial markets should assist in maintaining the lending activity of banks and in reducing the negative effect of destabilizing factors in the real sector.

The CBR in December last year noted that the economy's entry into a growth trajectory, as observed prior to the start of the pandemic, reduced the risks of banks.

"Continuing high lending activity determines the need for banks to accumulate additional reserves of capital that could be tapped in the event of stressful events in the future, without resorting to temporary regulatory easing. For these purposes, the CCyB could be used in 2022," the regulator said at the time.

The CBR has changed its assessment according to the report, "Macro-prudential policy of the Bank of Russia: Concept for implementing and planned solutions", posted on the regulator's website on Tuesday.

"The Bank of Russia has not used the countercyclical capital buffer, since there has been significantly outstripping growth in retail lending relative to corporate lending over the past decade, and risks have been minimized mainly by premiums on risk ratios for retail loans. Amid the crisis and the transformation of the Russian economy, the Bank of Russia does not intend to use the countercyclical capital buffer in the near future, as this could negatively affect corporate lending and economic recovery," according to the report.