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Russian regulator eases rules for calculating Basel III liquidity coverage ratio

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Russian regulator eases rules for calculating Basel III liquidity coverage ratio

The Central Bank of the Russian Federation softened the procedure for calculating the liquidity coverage ratio/indicator under Basel III rules, a move that will allow Russia's systemically important banks to comply with the required ratio without using credit lines from the regulator.

The liquidity coverage indicator, or LCI, is calculated by large banks, while Russia's systemically important financial institutions are also required to comply with the liquidity coverage ratio, LCR.

Coming into force Oct. 6, the amended LCI/LCR calculation procedure will apply to funds raised from small businesses covered under the Russia's deposit insurance system, as well as irrevocable savings certificates.

Banks will also be allowed to include in their LCI/LCR calculation funds from related parties if they were raised under market conditions and there are cooperation agreements between a bank and a related party. Such funds will be included in the LCI/LCR calculation similarly to funds raised from unrelated parties, which will allow lenders to apply a cash outflow rate of 40% instead of 100%.

A number of amendments will also apply to the inclusion of cash flows on derivatives into the LCI/LCR calculation, the central bank said Sept. 25. In addition, the regulator decided to change requirements for classifying certain funds and securities as highly liquid assets.

The upcoming changes will have a positive effect on banks, allowing them to manage their liquidity more efficiently, news agency Prime said Sept. 25, citing Elizaveta Rozanova, who heads PJSC ROSBANK's integrated risk management center. Other analysts cited by the newswire also believe the new measures will help lenders boost their financial results and increase lending to the economy.