Business news

MINSK, 21 September (BelTA) – The Belarusian banking sector is resistant to assumed risks. This conclusion was made after the asset quality rating of Belarusian banks which was initiated by the National Bank and finished in July 2016, BelTA learned from the Information and Public Relations Department of the National Bank.

The National Bank wanted to get an independent assessment of the repayment risk assumed by Belarusian banks and the possibility to mitigate this risk using available funds. “Asset quality rating is a special diagnostic study when a certain scenario is applied to the bank’s loan portfolio and the impact of this scenario on the bank is analyzed,” the specialists of the department explained. “However, the results of the special diagnostic study cannot be used to recognize the bank as a troubled one.”

The procedure was applied to nine large banks accounting for 92% of the total banking assets in the country. The procedure was executed by Belarusian offices of such authoritative international audit agencies as KPMG, Deloitte, Ernst & Young, and PKF (OOO FBK-Bel) having the experience of such assessments in the European Union countries. International methods were used, the results were confirmed by foreign offices of audit agencies.

“Taking into account the results of the asset quality rating, the capital adequacy ratio of the entire banking sector made up 10.76% as of 1 August 2016 (the adequacy ratio of the regulatory capital calculated in accordance with the National Bank was 17.13% as of 1 August 2016),” the representatives of the department said. “Therefore, the main indicator of the banks’ resistance to assumed risks - the coefficient of the capital adequacy inclusive of the conservation buffer – is high enough for the effective mitigation of the possible negative impact.”

OAO ASB Belarusbank, OAO Priorbank, OAP Belgazprombank, ZAO Bank VTB (Belarus), OAO BPS-Sberbank, and OAO BelVEB have a sufficient amount of the regulatory capital for handling the impact of the possible worsening of the financial standing of borrowers and the worsening of the external economic situation. The regulatory capital adequacy of the biggest Belarusian bank, Belarusbank, which accounts for about 42% of the country’s banking assets, reached 17.5%, while the National Bank’s minimum requirement is 10.625%. In accordance with the National Bank’s calculations, the regulatory capital adequacy of Belarusbank made up 18.8% as of 1 august 2016.

OAO Belagroprombank, OAO Belinvestbank, and ZAO Alfa-Bank can possibly fail to fulfill the National Bank’s requirement regarding the regulatory capital. The abovementioned banks have submitted their plans to increase this capital to the National Bank. “The efforts to ensure capital adequacy does not mean that the owner will increase the bank’s funds. First of all, these plans envisage the reduction of assumed credit risks, raising the quality credit services, higher capitalization and profit thanks to the optimization of expenses and the attraction of subordinate loans,” BelTA learned from the National Bank.

These action plans were considered at the session of the Board of the National Bank, their implementation will be monitored by the regulator.

The results of the asset quality rating were discussed at the session of the Financial Stability Council on 12 September. The council approved the plans to minimize the risks revealed during the asset quality rating.

The National Bank informed that the government has already taken measures to minimize the risks. For example, a decision was made to increase the authorized fund of Belinvestbank. The council also decided to issue a subordinate loan to Belagroprombank.

“The government will take additional measures if necessary,” the representatives of the department said.

They added that the independent assessment of Belarusian bank assets will help make to the Belarusian banking system more attractive for direct investments and long-term loans. Asset quality rating will be continued, the specialists added.

Asset quality rating is a widespread practice. For example, 130 large European banks accounting for 83% of the Eurozone’s banking system went through it in 2013-2014.