CBR permits VTB to switch to advanced approach in assessment of credit risks

MOSCOW. Nov 21 (Interfax) - The Central Bank of Russia (CBR) has permitted VTB to transition to the Internal Ratings-Based Approach (IRB) in assessment of credit risks, the regulator said in a statement on its website.

The Basel II approach based on banks' internal ratings more accurately assesses credit risks using complex mathematical and statistical models, allowing banks to save capital and show higher capital adequacy. In Russia, the IRB approach can be applied only by systemically important lenders with assets of at least 500 billion rubles.

The permission will come into force on November 30 after the VTB supervisory board makes a decision on the application of these methodologies and models.

At the initial stage, the bank will be entitled to use models to apply the IRB for certain segments of retail and corporate credit claims, for which the bank has submitted an application. According to the sequential transition plan, within three years the bank will transfer the remaining segments of credit claims, except for assets for which credit risk will continue to be calculated in accordance with the standardized (finalized) approach, to IRB.

Currently, three banks have received permission to use internal models in assessing credit risk: Sberbank , Raiffeisenbank and Alfa-Bank.

Applications for the use of this approach are currently submitted on a voluntary basis. The Central Bank had planned to oblige all systemically important banks to switch over to the advanced approach from 2023. However, in September it was announced that the regulator had postponed the implementation of these measures by a year.