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INFORMATION OF CENTRAL BANK OF THE RUSSIAN FEDERATION

Answers to frequently asked questions according to the Letter of the Bank of Russia of 29.12.2012 No. 192-T "About methodical recommendations about realization of approach to calculation of credit risk on the basis of internal bank ratings"

Question 1. In case of the choice of the quantitative principle for step-by-step implementation of approach to calculation of credit risk on the basis of internal bank ratings (further - TAC) whether 3 Items 1 of appendix 1 (further - Methodical recommendations) to the Letter of the Bank of Russia of 29.12.2012 follow as estimated amount according to the paragraph to No. 192-T "About methodical recommendations about realization of approach to calculation of credit risk on the basis of internal bank ratings" (further - the Letter of the Bank of Russia No. 192-T) to use the amount of balance sheet assets and credit equivalents of contingent obligations of credit nature without weighing on risk coefficients?

Answer. In case of the choice of the quantitative principle for step-by-step implementation of TAC by bank the estimated amount joins balance sheet assets and credit equivalents of contingent obligations of credit nature without their weighing on risk level. The size of reserves on possible losses according to loans is not subtracted from estimated amount.

Question 2. Whether application of TAC to classes of credit requirements with exception of insignificant subclasses is possible? Whether such subclass, including, on regional sign can be allocated? What shall be criteria of materiality?

Answer. If the bank within the plan of consecutive application begins to use TAC for any class of credit requirements (or separate subclass of credit requirements in case of retail requirements) at the level of separately taken structural division, it shall apply TAC to all credit requirements within this class (or subclass) credit requirements in this division. In coordination with Bank of Russia bank has the right not to apply TAC to separate classes or subclasses of credit requirements in case of their insignificance. The bank develops criteria of materiality independently.

Question 3. Whether it is necessary to carry the transaction to subclass "financing of the revenue-producing real estate" in case of availability of guarantees/guarantees / other providing according to transactions of financing of the real estate in case of compliance to the main criteria of determination of this type of specialized crediting?

Answer. Availability of guarantees, guarantees or other providing does not influence classification of the credit requirement, in particular, of reference of the transaction of financing of the real estate to subclass "financing of the revenue-producing real estate".

Question 4. What procedure of payments of the expected losses on transactions of specialized crediting for banks, the using TACs for corporate borrowers but which are not meeting the minimum requirements for determination of probabilities of default for credit requirements of specialized crediting? Whether Table 1 of Methodical recommendations is used for determination of coefficients of weighing on risk?

Answer. According to Item 4.2 of Methodical recommendations, the bank performs the choice of coefficient of weighing, being guided by the criteria of reference recommended by supervisory authority for specialized crediting which complete list is given in Appendix 4 to working variant of translation into Russian of the document of Basel Committee on Banking Supervision "The international convergence of measurement of the capital and standards of the capital: new approaches" (Basel II), posted on the website of the Bank of Russia.

When calculating of the expected losses for transactions of specialized crediting, except for financings of commercial real estate with unstable price parameters, for determination of coefficients of weighing on risk instead of Table 1 the following table is used:

Strong

Good

Satisfactory

Weak

Default

5%

10%

35%

100%

625%

When calculating of the expected losses for transactions of financing of commercial real estate with unstable price parameters for determination of coefficients of weighing on risk instead of Table 1 the following table is used:

Strong

Good

Satisfactory

Weak

Default

5%

5%

35%

100%

625%

Question 5. What procedure for application of discount in formula (12) Item 4.7 of Methodical recommendations? Whether discount will be applied only to the securities on balance at bank which are not included in trade portfolio, and to other asset types, including the credits, guarantees and letters of credit, discount will not be applied?

Answer. If the bank has requirements to the partner on return of the securities or other assets specified in the Table 2, discount is applied to them. For other securities which are not specified in the Table 2, the same discount, as is applied to the shares which are not entering the main stock index, i.e. 25%.

Question 6. Whether in case of determination of losses in case of default are recognized within the replacements method (Item 4.7 of Methodical recommendations) of the guarantee of physical persons?

Answer. Guarantees of physical persons can be considered as providing only within advanced TAC.

Question 7. Whether the conversion coefficient for off-balance contingent obligations of credit nature will depend on warranty type or the letter of credit within basic TAC?

Answer. According to item 4.9 of Methodical recommendations within basic TAC regarding contingent obligations of credit nature the conversion coefficient of 75% will be applied regardless of their type. For contingent obligations of credit nature which are certainly revocable or assume automatic cancellation (for example, owing to deterioration in creditworthness of the borrower) at any time according to the decision of bank without prior notice, the conversion coefficient of 0% is applied.

Question 8. According to the paragraph of the 13th Item 5.1 of Methodical recommendations different scores can be assigned to various credit requirements to the same borrower. What procedure for reflection of guarantees on the tool in probability of default on this tool?

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