Central Bank of Russia revises concentration risk reform concept and extends 50% risk weight for large state-owned companies to 2029

The Central Bank of Russia has published the results of its discussions with market participants on reforming credit concentration risk regulation and finalised several elements of its concept, including transitional treatment for large state-owned borrowers and adjustments to related-borrower and related-party exposure rules. The 50% reduced risk weight for state-owned companies with revenues above 2% of GDP, used when calculating concentration ratios, will remain in place for an additional year until 1 January 2029. By that date, the concentration limit for such companies will be the N30 ratio calculated by systemically important banks. The Bank also adjusted the operational independence criteria used to identify a group of related borrowers (GRB), easing board composition requirements and treating companies as operationally independent where mutual financial obligations within the GRB are minor. In addition, it specified which bank subsidiaries and dependent companies may be excluded from the N25 maximum risk ratio for related parties, with financial subsidiaries providing insignificant financing for bank owners’ business to be excluded. Further measures to reduce concentration risks are expected to be implemented as early as 2025, including a gradual introduction of concentration calculations per securities issuer under reverse repo agreements, inclusion of claims for accrued income on loans in the calculation, and additional criteria for operational independence.