PROVISION OF CENTRAL BANK OF THE RUSSIAN FEDERATION

of August 6, 2015 No. 483-P

About procedure of payments of size of credit risk on the basis of internal ratings

This Provision according to the Federal Law of July 10, 2002 No. 86-FZ "About the Central bank the Russian Federation (Bank of Russia)" (The Russian Federation Code, 2002, No. 28, Art. 2790; 2003, No. 2, Art. 157; No. 52, Art. 5032; 2004, No. 27, Art. 2711; No. 31, Art. 3233; 2005, No. 25, Art. 2426; No. 30, Art. 3101; 2006, No. 19, Art. 2061; No. 25, Art. 2648; 2007, No. 1, Art. 9, Art. 10; No. 10, Art. 1151; No. 18, Art. 2117; 2008, No. 42, Art. 4696, Art. 4699; No. 44, Art. 4982; No. 52, Art. 6229, Art. 6231; 2009, No. 1, Art. 25; No. 29, Art. 3629; No. 48, Art. 5731; 2010, No. 45, Art. 5756; 2011, No. 7, Art. 907; No. 27, Art. 3873; No. 43, Art. 5973; No. 48, Art. 6728; 2012, No. 50, Art. 6954; No. 53, Art. 7591, Art. 7607; 2013, No. 11, Art. 1076; No. 14, Art. 1649; No. 19, Art. 2329; No. 27, Art. 3438, Art. 3476, Art. 3477; No. 30, Art. 4084; No. 49, Art. 6336; No. 51, Art. 6695, Art. 6699; No. 52, Art. 6975; 2014, No. 19, Art. 2311, Art. 2317; No. 27, Art. 3634; No. 30, Art. 4219; No. 45, Art. 6154; No. 52, Art. 7543; 2015, No. 1, Art. 4, Art. 37; No. 27, Art. 3958, Art. 4001; No. 29, the Art. 4348) (further - the Federal Law "About the Central Bank Russian Federation (Bank of Russia)") and 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 July 31, 2015 No. 23) establish procedure of payments of size of credit risk on the basis of internal ratings, including requirements to bank control techniques risks and to the models of quantitative risks assessment used for calculation of size of credit risk on the basis of internal ratings for inclusion in capital adequacy ratios of bank (the standard rate of sufficiency of the basic capital of bank, the standard rate of sufficiency of fixed capital of bank, the standard rate of sufficiency of own means (capital) of bank) established by the Instruction of the Bank of Russia of November 29, 2019 No. 199-I "About obligatory standard rates and allowances to capital adequacy ratios of banks with the universal license" registered by the Ministry of Justice of the Russian Federation on December 27, 2019 No. 57008 (further - the Instruction of the Bank of Russia No. 199-I), and also establishes criteria of materiality of changes in the specified control techniques risks and models regarding calculation of size of credit risk with use of approach on the basis of internal ratings (further - TAC).

Section I. General provisions

Chapter 1. Conditions for inclusion in capital adequacy ratios of the size of credit risk calculated on the basis of TAC

1.1. The bank calculates the size of credit risk on the basis of TAC for the purposes of inclusion in capital adequacy ratios instead of the size of credit risk calculated on the basis of the technique established by Items 2. 1, 2.3 both 2.6 Instructions of the Bank of Russia No. 199-I and appendices 2 and 3 to the Instruction of the Bank of Russia No. 199-I (Items 3.1 and 3.3 of the Instruction of the Bank of Russia No. 199-I and appendices 3 and 11 to the Instruction of the Bank of Russia No. 199-I in case of adoption of the decision by bank according to Item 1.7 of the Instruction of the Bank of Russia No. 199-I) (further - the standardized approach), on condition of receipt of permission of the Bank of Russia according to the Instruction of the Bank of Russia of August 6, 2015 No. 3752-U "About procedure for receipt of permissions to application of bank control techniques credit risks and models of quantitative assessment of credit risks for the purpose of calculation of capital adequacy ratios of bank, and also evaluation procedure of their quality" <1> (further - the Instruction of the Bank of Russia No. 3752-U) (further - permission to application of TAC for the purpose of calculation of capital adequacy ratios) from the date specified in permission to application of TAC for the purpose of calculation of capital adequacy ratios and observance of the requirements established by this Provision.

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<1> It is registered by the Ministry of Justice of the Russian Federation on August 25, 2015 No. 38679.

1.2. This Provision determines procedure of payments of size of credit risk for balance sheet assets, derivative financial instruments and contingent obligations of credit nature except for (further - credit requirements):

the assets reducing the amount of own means (capital) of bank according to the Provision of the Bank of Russia of July 4, 2018 No. 646-P "About technique of determination of own means (capital) of credit institutions ("Basel III")", the registered Ministry of Justice of the Russian Federation on September 10, 2018 No. 52122, on December 19, 2018 No. 53064 (further - the Provision of the Bank of Russia No. 646-P);

equity and debt securities according to which the market risk is calculated according to the Provision of the Bank of Russia of December 3, 2015 No. 511-P "About procedure of payments credit institutions of size of market risk", the registered Ministry of Justice of the Russian Federation on December 28, 2015 No. 40328;

the credit requirements provided by paragraphs the second - the seventh subitem 2.3.1 of Item 2.3 of the Instruction of the Bank of Russia No. 199-I, and remaining balance on the balance sheet accounts listed subitem 2.3.4 in paragraph three. 1, paragraph third subitem 2.3.4. 2, the paragraph third subitem 2.3.4.3 of Item 2.3 of the Instruction of the Bank of Russia No. 199-I, except for remaining balance on balance sheet account 52601;

fixed assets, the material inventories, other assets not subject to credit risk which join in calculation of capital adequacy according to Item 2.3 of the Instruction of the Bank of Russia No. 199-I (Item 3.3 of the Instruction of the Bank of Russia No. 199-I in case of adoption of the decision by bank according to Item 1.7 of the Instruction of the Bank of Russia No. 199-I).

1.3. For calculation of size of credit risk on the basis of PVR bank can use one of the following approaches:

basic TAC (further - BPVR) according to which the bank uses own estimates of probability of default corresponding to Chapters 10 and 13 of this provision;

the advanced TAC (further - PPVR) according to which the bank uses own estimates of probability of default, the wastage rate in case of default and the sizes of the credit requirement subject to risk of default received according to heads 10, of the 11 and 13 this provision (further - components of credit risk), and also independently calculates term before repayment of the credit requirement according to Chapter 10 of this provision.

1.4. Assessment of the control techniques used by bank risks and models of quantitative risks assessment for determination of size of credit risk for the purpose of decision making about issue (refusal in issue) permissions to application of TAC for the purpose of calculation of capital adequacy ratios is carried out by the Bank of Russia based on the analysis of the documents provided by bank and the reasons (information) provided by this Provision and the Instruction of the Bank of Russia No. 3752-U.

1.5. The bank independently determines the criteria applied within TAC according to this Provision in internal documents:

necessary number of credit requirements and (or) data, credit risk, sufficient for correct (reliable) quantitative assessment of components (Items 12.7 and 13.1 of this provision);

representativeness of selection of the data used for quantitative assessment of components of credit risk (Item 13.1 of this provision);

materialities of level of control over assets and the income (Item 2.12 of this provision);

accuracy of estimates of components of credit risk (Items 10. 4, 10.13, 12.7 and 13.1 of this provision);

relevancy of costs (Items 4.8 and 10.12 of this provision);

regularity of financing of the borrower (Item 10.19 of this provision);

high concentration (Items 12.4 and 12.7 of this provision);

materialities of characteristics of the borrower and financial instruments (Items 12.7 and 12.8 of this provision);

uniformity of credit requirements for the purpose of their reference to portfolios of uniform credit requirements (categories of rating scale) (Item 12.7 of this provision);

materialities of information (Items 12. 9, 12.13, 12.15, 13.1, 13.2, 13.11 and 13.12 this provision);

statistical certainty and high forecast precision (Items 12.15 and 13.15 of this provision);

materialities of changes of environmental conditions (Items 16.3 and 16.4 of this provision);

high degree of dependence between the frequency of defaults and size of the credit requirement (Item 13.20 of this provision);

insignificance of change of the wastage rate for the purposes of classification of renewable retail credit requirements in comparison with other subclasses of credit requirements to retail borrowers (Item 2.8 of this provision);

materialities of dependence of obligation fulfillment of the borrower on income gained from use of real estate object (Item 16.2 of this provision);

materialities of dependence of cost of providing on financial condition of the borrower (Item 16.2 of this provision).

The bank proves the criteria specified in this Item during quality evaluation of bank control techniques by the Bank of Russia by credit risks and models of the quantitative assessment of credit risks which is carried out according to the Instruction of the Bank of Russia No. 3752-U on compliance to the requirements established by this Provision for receipt of permission to application of TAC for the purpose of calculation of capital adequacy ratios.

1.6. For application of TAC for the purpose of calculation of capital adequacy ratios in bank the management system credit risk meeting the following requirements shall function:

rating systems according to Item 12.1 of this provision allow to receive exact assessment of credit risk of the borrower and the financial instrument, provide ranging of credit requirements for the level of credit risk, and also exact and consecutive quantitative assessment of its components;

the internal ratings and estimates of probability of default and losses used for calculation of size of credit risk for the purposes of capital adequacy ratios of bank are included in management system by credit risk and decision making process about issuance of credits (further - credit decisions) according to Item 1.9 of this provision;

the divisions responsible for credit risk management and development of rating systems of bank (further - divisions on credit risk management), perform the functions listed in Item 15.5 of this provision irrespective of the divisions performing credit operations and (or) interaction with borrowers (further - business divisions);

the bank stores all data which are used for assessment and credit risk management on permanent basis;

the bank exercises quality control of the data (appendix 3 to this Provision) used in models;

information systems of bank allow to perfrom daily calculation of the size of credit risk on the basis of TAC according to the Section II of this provision according to all credit requirements concerning which the bank petitions for receipt of permission;

the bank reflects methodology and procedure for creation and functioning of rating system in internal documents and constantly observes them in the current activities;

the bank at least once a year carries out internal validation of the rating systems according to Chapter 14 of this provision;

the division responsible for carrying out internal validation (further - division of validation), according to Items 1.6.1 and 1.6.2 of this provision is organizationally and functionally independent of divisions on credit risk management, the divisions performing use of rating systems, and business divisions of bank;

the service of internal audit of bank at least once a year performs quality check of management system credit risk, completeness and efficiency of the carried-out internal validation of rating systems (including respect for organizational and functional independence of division of validation), qualities of functioning of rating systems according to requirements of this provision which results are represented to the Bank of Russia according to the paragraph the second Item 6. 1, Items 6.4 and 13 of the Instruction of the Bank of Russia No. 3752-U.

1.6.1. Organizational independence of division of validation of division on credit risk management, the divisions performing use of rating systems, and business divisions of bank is provided to one of the following methods:

organizational subordination to the different members of collegiate executive body of bank having necessary qualification in questions of methodology of credit risk management and rating systems;

organizational subordination to one member of collegiate executive body of bank having necessary qualification in questions of development and validation of rating systems on condition of acceptance and control of measures of differentiation of conflict of interest in activities of the corresponding member of collegiate executive body and all heads and (or) curators of division of validation regarding ensuring independence of function of validation of functions on credit risk management and use of rating systems.

The method of ensuring organizational independence of division of validation is determined (and then annually is reviewed or proves to be true) by collegiate executive body of management of bank taking into account the report on identification and differentiation of the conflict of interest prepared according to Item 15.9 of this provision.

1.6.2. Functional independence of division of validation is provided with department of processes of validation from processes of development, functioning and use of rating systems, acceptance and assessment of credit risk and includes:

independence of processes of development, coordination and approval of techniques, regulations and the quality standards of validation of influence of divisions on credit risk management, the divisions performing use of rating systems, business divisions of bank;

separation of responsibility for quality and results of the carried-out validation, reports on validation and responsibility for quality of the estimated rating systems;

availability both at division of validation, and at divisions on credit risk management and the divisions performing use of rating systems, the rights to submit for consideration of collegiate executive body of bank or the specialized committee on questions of application of TAC created under collegiate executive body as which questions of acceptance of credit risk do not enter conclusions and the disagreements connected with techniques, procedures and results of validation, and also corrective measures, revealed in rating systems (including situations when difficulties in remedial action of the rating systems reflected in reports on validation for the purpose of receipt of offers on methods of their elimination from divisions of bank whose area of responsibility appropriate questions enter take place);

availability at divisions on credit risk management, the divisions performing use of rating systems, other divisions of obligation on timely and complete remedial action of the rating systems reflected in reports on validation regarding their responsibility;

absence in systems of remuneration of staff of division of validation and all heads and (or) curators of the division of validation including supervising the member of collegiate executive body of bank, tasks and target indicators connected with development, implementation and use of rating systems and models, except for the indicators characterizing positive dynamics of quality of models (for example, increase in the forecast accuracy of models determined according to Item 1.5 of this provision after remedial action of the rating systems reflected in the reports on validation, or remedial action reflected in appraisal reports of the rating systems prepared by the Bank of Russia according to Item 6 of the Instruction of the Bank of Russia No. 3752-U). The system of remuneration of staff of division of validation shall not stimulate decline in quality of the carried-out validation and shall not create interest in provision of the raised number of the positive conclusions in reports on validation.

1.7. The bank petitioning for receipt of permission to application of TAC for the purpose of calculation of capital adequacy ratios under BPVR uses in internal processes of adoption of credit decisions and credit risk managements the rating systems meeting the requirements specified in the Section IV of this provision for classes of credit requirements (credit requirements to corporate borrowers, credit requirements to sovereign borrowers, credit requirements to the financial organizations, credit requirements to retail borrowers, shares in the capital of the third parties determined by Chapter 2 this provision) concerning which the bank petitions for receipt of permission, at least three years before the date of receipt of permission to application of BPVR. During the specified period discrepancies to separate requirements to rating system and quantitative assessment of components of credit risk are allowed in case the bank proves to the Bank of Russia during assessment objective impossibility of their accomplishment during this period and insignificance of influence on results of application of TAC, on condition of elimination of discrepancies to decision date by the Bank of Russia about issue or about refusal in issue of permission to application of TAC for the purpose of calculation of capital adequacy ratios.

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