The Central Bank of Russia has recently published the legislation on the adoption of the Advanced Internal Ratings Based (AIRB) for Credit Risk. There is some ambiguity in the Russian banking sector with regards to costs and benefits of adopting the new rules. In the long-term, transition to the AIRB approach is likely to allow Russian banks to have lower capital requirements due to a more granular approach to risk assessment and greater risk sensitivity.
Adopting the AIRB rules could also give a positive signal to the market about increased reliability of risk systems and processes, thus improving bank’s reputation and potentially decreasing its funding costs. However, transition to the new rules will be rather challenging for some Russian banks.
This paper provides an overview of the main challenges likely to be faced by banks and the regulator during the AIRB application process and outlines steps for a successful completion of such process.
Available only in Russian.
