Anti-crisis measures for brokers, dealers, forex dealers, managers, management companies, and non-governmental pension funds in 2024 (20.11.2023)

In 2023, the Bank of Russia adopted support measures, including regulatory easing, to ensure the financial resilience of participants in the market of financial intermediaries, collective investment, and their ability to fulfil obligations to clients, as well as to reduce the impact of potential future sanctions risks, and measures to maintain the financial stability amid restrictions imposed on the Russian Federation.

Given the adjustment of financial institutions to the operation in the current environment, and the incorporation of individual measures into regulation, the regulator does not find it reasonable to continue to apply certain measures. However, the Bank of Russia considers it necessary to additionally extend individual measures to mitigate the effects of potential sanctions restrictions.

Support measures to be cancelled

Permission for professional securities market participants (PSMPs), non-governmental pension funds (NPFs) and management companies of investment funds, unit investment funds and NPFs (MCs) to use alternative credit ratings in case some assets (counterparties) do not have a credit rating. The amount of assets subject to this easing is negligent for the said financial market participants (their performance will not deteriorate after the easing is cancelled).

Easing for MCs of exchange-traded unit investment funds related to the minimum frequency of calculating the estimated price of an investment unit, as they have had enough time to adjust their operations to the current environment.

Temporary requirements for brokers to take into account blocked assets when calculating the liquidity coverage ratio (LCR). Under these temporary requirements, brokers were permitted to include blocked assets in the calculation of highly liquid assets as part of their LCR calculation prior to 30 June 2023. According to the monitoring of financial market participants’ compliance, the above temporary requirements have been met, with business models being adjusted to the transfer of assets to brokers and trade infrastructures in EAEU countries, among other things.

Permission for specialised depositories and MCs to inform the Bank of Russia on a one-off basis about their failures to calculate the estimated prices of investment units that have occurred due to the same reasons beyond the control of MCs. The measure has not been extended, as MCs made decisions to either allocate assets of blocked funds to specially created closed-end unit investment funds or change types of blocked funds for closed-end unit investment funds.

Temporary requirements for brokers, dealers, securities managers (hereinafter, managers) and forex dealers to take into account blocked assets when calculating the capital adequacy ratio (CAR). To ensure compliance with these temporary requirements, PSMPs include blocked assets in their CAR calculations and adjust business models to the transfer of assets to brokers and trade infrastructures in EAEU countries. Moreover, the temporary requirements related to blocked assets have been reflected in amendments to Bank of Russia Ordinance No. 5873-U.¹

Temporary requirements for MCs and PSMPs to include blocked assets in the calculation of their equity. To ensure compliance with these temporary requirements, PSMPs and MCs discount blocked assets when calculating their equity and adjust business models to the transfer of assets to brokers and trade infrastructures in EAEU countries. Moreover, the requirement for PSMPs and MCs not to include blocked assets in their equity calculations has been reflected in amendments to Bank of Russia Ordinance No. 5099-U.²

Non-application of enforcement measures³ against MCs for failures to meet individual requirements, as they have had enough time to adjust to the operation in the current environment.

Temporary requirements for operations of MCs (other than NPF MCs) related to the placement of substitute bonds. No extension is needed as Bank of Russia Ordinance No. 4129-U⁴ has been amended accordingly.

Support and restrictive measures to be extended⁵ (including in a modified form)

The right of PSMPs, NPFs and MCs not to disclose information set out in the decisions of the Bank of Russia Board of Directors, dated 23 December 2022 and 23 June 2023. The regulator intends to extend this measure to mitigate the effects of restrictions imposed by foreign countries, and potential sanctions restrictions that may be introduced against the said financial market participants or their counterparties.

Temporary requirements for operations of NPFs, NPF MCs related to the placement of substitute bonds. The regulator intends to extend the measure, as some NPFs still hold bonds that have not been substituted.

Application of the list of offshore zones in the analysis of persons entitled to dispose of stocks (shares) in NPFs, PSMPs and MCs directly or indirectly.

Non-application of enforcement measures against NPFs for failures to meet individual deadlines for making pension and other payments. The regulator is making efforts to incorporate relevant requirements into regulation on a permanent basis.

Temporary requirements for operations of managers related to opening C-type trust bank accounts and C-type depository accounts of a custodian. The regulator intends to extend the restrictive measure to ensure further compliance with Executive Order No. 95⁶ by managers.