PROVISION OF CENTRAL BANK OF THE RUSSIAN FEDERATION

of March 26, 2004 No. 254-P

About procedure for forming by credit orgnization of reserves on possible losses according to loans, on the loan and equated to it debt

This Provision based on the Federal Law "About the Central Bank Russian Federation (Bank of Russia)" (The Russian Federation Code, 2002, No. 28, Art. 2790; 2003, No. 2, Art. 157, No. 52 (part I), Art. 5032), Federal Law "About Banks and Banking Activity" (Sheet of the Congress of People's Deputies of RSFSR and Supreme Council of RSFSR, 1990, No. 27, Art. 357; Russian Federation Code, 1996, No. 6, Art. 492; 1998, No. 31, Art. 3829; 1999, No. 28, Art. 3459, 3469, 3470; 2001, No. 26, Art. 2586; No. 33 (part I), Art. 3424; 2002, No. 12, Art. 1093; 2003, No. 27 (part I), Art. 2700, No. 50, Art. 4855, No. 52, Art. 5033), article 292 of the Tax Code of the Russian Federation (Russian Federation Code, 2000, No. 32, Art. 3340; 2002, No. 22, the Art. 2026) and according to the solution of the Board of directors of the Bank of Russia (the minutes of the Board of directors of the Bank of Russia of March 19, 2004 No. 5) establish procedure for forming by credit institutions of reserves on possible losses according to loans, on the loan and equated to it debt (further - loans), to which the monetary claims and requirements following from transactions with financial instruments which list is given in appendix 1 to this Provision, and also feature of implementation by the Bank of Russia of supervision of observance by credit institutions of procedure for forming of reserves on possible losses according to loans belong.

Chapter 1. General provisions

1.1. Credit institutions shall create reserves on possible losses according to loans (further - reserve) according to the procedure established by this Provision.

1.2. Classification (reclassification) of loans and forming (refining of the size) of reserve are performed based on the following principles:

compliance of the actual actions for classification of loans and forming of reserve to requirements of this provision and internal documents of credit institution concerning classification of loans and the forming of reserve accepted by authorized body (authorized bodies) of credit institution (further - internal documents);

the complex and objective analysis of all information relating to the sphere of classification of loans and forming of reserves;

timeliness of classification (reclassification) of the loan and (or) forming (amendments of the size) of reserve and reliability of reflection of changes of the size of reserve in accounting and reporting.

1.3. The reserve is created by credit institution in case of impairment of the loan (loans), that is in case of loss by the loan of cost owing to non-execution or improper execution by the borrower of obligations according to the loan to credit institution or existence of real threat of such non-execution (improper execution) (further - credit risk according to the loan).

1.4. Loss size is determined by the loan of cost as difference between book value of the loan, that is the remaining balance of debt on the loan reflected on accounts of financial accounting at the time of its assessment, and its fair value at the time of assessment performed according to the procedure, established by this Provision (further - current value of the loan). Assessment of fair value of the loan (further - loan assessment) is performed on permanent basis since the moment of issue of the loan.

1.5. The reserve is created according to the specific loan or on portfolio of uniform loans, that is on group of the loans with similar characteristics of credit risk conforming to the requirements established by this Provision, and isolated for the purpose of forming of reserve (daleeportfel uniform loans) in connection with the credit risk caused by activities of the specific borrower or group of borrowers, provided by which loans are included in portfolio of uniform loans.

1.6. When forming reserve credit institutions determine by the loan according to procedure, stipulated in Item 1.7 and Chapter of 3 this provision, the size of settlement reserve, that is the reserve reflecting the size of losses of credit institution according to the loan which shall be acknowledged in case of observance of the evaluation procedure of factors of credit risk provided by this Provision according to the loan without providing according to the loan.

In the presence of the providing according to the loan provided by Chapter 6 of this provision, the size of the created reserve is determined according to the procedure, established by the specified Chapter.

In the absence of the providing according to the loan provided by Chapter 6 of this provision, the reserve is created in the amount of settlement reserve.

Forming of portfolios of uniform loans, determination of the size of reserve on portfolios of uniform loans are performed according to the procedure established by Chapter 5 of this provision.

1.7. For the purpose of determination of the size of settlement reserve in connection with action of factors of credit risk of the loan are classified based on professional judgment (except for the loans grouped in portfolio of uniform loans) in one of five quality categories:

The I (highest) quality category (standard loans) - lack of credit risk (the probability of financial losses owing to non-execution or improper execution by the borrower of obligations according to the loan is equal to zero);

The II quality category (non-standard loans) - moderate credit risk (the probability of financial losses owing to non-execution or improper execution by the borrower of obligations according to the loan causes its impairment in the amount of one to 20 percent);

III quality category (doubtful loans) - significant credit risk (the probability of financial losses owing to non-execution or improper execution by the borrower of obligations according to the loan causes its impairment in the amount of 21 to 50 percent);

The IV quality category (problem loans) - high credit risk (the probability of financial losses owing to non-execution or improper execution by the borrower of obligations according to the loan causes its impairment at the rate from 51 percent to 100 percent);

The V (lowest) quality category (hopeless loans) - is absent probability of return of the loan owing to inability or refusal of the borrower to fulfill obligations on the loan that causes complete (in the amount of 100 percent) impairment of the loan.

The loans carried to the II-V quality categories are depreciated.

The credit institution creates reserves on portfolios of uniform loans according to the risk assessment technique applied by it on the corresponding portfolios of uniform loans. The credit institution distributes the built portfolios of uniform loans on the following quality categories:

The I quality category - portfolios of uniform loans with size of created reserve of 0 percent (losses on portfolio of uniform loans are absent); The II quality category - portfolios of uniform loans with size of created reserve no more than 3 percent of aggregate book value of the loans united in portfolio; III quality category - portfolios of uniform loans with size of created reserve over 3 and to 20 percent of aggregate book value of the loans united in portfolio;

The IV quality category - portfolios of uniform loans with size of created reserve over 20 and to 50 percent of aggregate book value of the loans united in portfolio; The V quality category - portfolios of uniform loans with size of created reserve over 50 percent of aggregate book value of the loans united in portfolio.

1.8. The reserve is created within the amount of principal debt (book value of the loan). Do not join in the amount of principal debt: caused by the law, business customs or the agreement based on which loan is allowed payments in the form of interest for using the loan, commission charges, penalties, and also other payments for benefit of credit institution following from the agreement based on which loan is allowed (further - percent on the loan).

1.9. The reserve is created in currency of the Russian Federation irrespective of loan currency.

1.10. Requirements of this provision do not extend on:

the financial assets reflected in financial accounting on market value on which revaluation according to regulations of the Bank of Russia is performed;

the financial assets which are elements of calculation base according to the Provision of the Bank of Russia of March 20, 2006 No. 283-P "About procedure for forming by credit institutions of reserves on possible losses", the registered Ministry of Justice of the Russian Federation on April 25, 2006 No. 7741, on July 2, 2007 No. 9739, on December 6, 2007 No. 10639, on September 10, 2008 No. 12260 ("the Bulletin of the Bank of Russia" of May 4, 2006 No. 26, of July 11, 2007 No. 39, of December 17, 2007 No. 69, of September 17, 2008 No. 49);

requirements to the Bank of Russia;

requirements of the credit institutions performing functions of the central partner, corresponding to conditions of code 8846 of appendix 1 to the Instruction of the Bank of Russia of December 3, 2012 No. 139-I "About obligatory standard rates of banks" registered by the Ministry of Justice of the Russian Federation on December 13, 2012 No. 26104, on November 29, 2013 No. 30498, on June 18, 2014 No. 32735, on October 20, 2014 No. 34362, on December 11, 2014 No. 35134, on December 24, 2014 No. 35372, on December 29, 2014 No. 35453, on February 20, 2015 No. 36180, on July 16, 2015 No. 38029, on September 23, 2015 No. 38976 ("the Bulletin of the Bank of Russia" of December 21, 2012 No. 74, of November 30, 2013 No. 69, of July 9, 2014 No. 63, of October 23, 2014 No. 99, of December 22, 2014 No. 112, of December 31, 2014 No. 117-118, of March 4, 2015 No. 17, of July 22, 2015 No. 60, from __________ 2015 No. ____) (further - the Instruction of the Bank of Russia No. 139-I) arising on the transactions connected with implementation of clearing activities and execution of functions of the central partner.

Chapter 2. General requirements according to credit risks

2.1. Assessment of credit risk according to the loan and portfolios of uniform loans is performed on permanent basis. Classification and assessment of the loan (portfolios of uniform loans), determination (refining of the size) of reserve by the loan and portfolios of uniform loans are made with the frequency established by Chapters 3 and 5 of this provision.

2.2. Assessment of the loan and determination of the size of settlement reserve and reserve is performed by credit institutions independently on the basis of professional judgment, except as specified, when assessment of the loan and (or) determination of the size of reserve is made based on assessment of the Bank of Russia according to article 72 of the Federal law "About the Central Bank Russian Federation (Bank of Russia)" and with Chapter 7 of this provision.

2.3. Internal documents shall conform to requirements of this provision and other regulations concerning credit policy of credit institutions and (or) methods of its realization, and also to contain complete list of the essential factors used by credit institution in case of classification of loans according to this Provision. The structure of internal documents is determined by credit institution independently taking into account requirements of this provision.

The credit institution reflects in internal documents:

the system of assessment of credit risk according to loans allowing to classify loans (portfolios of uniform loans) by the quality categories provided by this Provision, including containing more disaggregated assessment procedures of quality of loans and forming of reserve than it is provided by this Provision;

evaluation procedure of loans, including criteria for evaluation of loans, procedure for documentary registration and confirmation of assessment of loans;

procedure for acceptance and execution of decisions on forming of reserve;

procedure for decision making about recognition of debt on loans of hopeless. The debt on loans is recognized hopeless and is subject to write-off by credit institutions according to the procedure, established by Chapter 8 of this provision;

the description of rules (methods, procedures) used for determination of reality of activities of the borrower - the legal entity in the sphere of production, performance of works and rendering services (further - reality of activities), including the list of the circumstances testimonial of possible absence at the borrower - the legal entity of real activities or its implementation in insignificant amounts in terms of money, not comparable to loan amount (sets of the loans allowed this borrower), the list of the main used sources of information on the matter characterizing the data necessary for identification of such borrowers, powers of the employees of credit institution participating in carrying out the specified work, procedure for decision making about reality of activities of the borrower (about recognition of activities of the borrower real). In case of assessment of activities of the borrower - the legal entity as real credit institutions shall recognize that results of these activities can be realized (are sold) in the market, thus that payment from consumers (buyers) is performed by them not due to systematic and essential use of the money and (or) other property provided to them by credit institution - the creditor directly or indirectly (through the third parties) with acceptance on credit institution - the creditor of credit risks. The minimum list of circumstances, each of which witnesses about possible absence at the borrower - the legal entity of real activities or its implementation in insignificant amounts in terms of money, not comparable to loan amount (sets of the loans allowed this borrower) which joins in internal documents of credit institution, contains in appendix 5 to this Provision. The credit institution has the right to provide in internal documents other additional circumstances testimonial of possible absence at the borrower - the legal entity of real activities or its implementation in insignificant amounts in terms of money, not comparable to loan amount (sets of the loans allowed this borrower);

the description of rules (methods, procedures) used in case of assessment of financial position of the borrower, the list of the main used sources of information on the matter, circle of the data necessary for assessment of financial position of the borrower, power of the employees of credit institution participating in carrying out the specified assessment and also procedure for decision making about assessment of financial position of the borrower;

criteria of materiality of turnovers of money according to the bank accounts of the borrower opened in credit institution;

criteria of materiality of the amounts and terms of the current card-index of unpaid settlement documents to bank accounts of the borrower, debt to the federal budget, budgets of subjects of the Russian Federation, local budgets and off-budget funds, overdue monetary commitments before the Bank of Russia on borrowed funds, procedure of the analysis of origins of the current card-index of unpaid settlement documents to bank accounts of the borrower, debt to the specified budgets, off-budget funds and the Bank of Russia for the purpose of assessment of financial position of the borrower - the legal entity according to subitem 3.4.1 of Item 3.4 of this provision;

criteria for evaluation of information provided by the borrower (including its completeness, relevance, reliability), and also measures for receipt of information on the borrower, including about its financial position, condition of its productive and financial and economic activity, the purpose on which loan is allowed the borrower and is used by it, about the planned sources of execution by the borrower of obligations according to the loan and about providing according to the loan;

procedure of control of correctness of assessment and determination of the size of reserves according to the loans specified in Item 3.6 of this provision;

criteria of materiality for the borrower of its overdue receivables for the purpose of application of the paragraph of the eighth Item 3.6 of this provision;

procedure for creation and further maintaining file of the borrower;

procedure for documentary registration and creation of professional judgment;

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