The Central Bank recommended banks not to increase limits on open currency positions

Until the end of the year, the regulator will not apply measures to banks for non-compliance with the limits of open currency positions, provided they comply with certain conditions.At the same time, the Central Bank asked banks not to increase limits on positions on July 1

The Bank of RUSSIA has extended, until December 31, 2022, the previously introduced easing for banks that fell under sanctions on open currency position limits (OCP). At the same time, the regulator recommended that banks not increase ORP relative to their positions as of July 1.

ORP is a mismatch of assets (claims) and liabilities (liabilities) in foreign currency.

“The decision was made to maintain the financial stability of banks and adapt them to comply with regulatory requirements <...> Banks should not increase the ORP on positions as of July 1, 2022 if the limits are not met as of that date,” the Central Bank said in a statement.

The regulator will continue to monitor currency positions and, when deciding on supervisory actions, “will assess the validity of exceeding limits, as well as the effectiveness of banks’ measures to limit currency risk.” it is assumed that banks must move to compliance with the limits of open foreign exchange positions by January 1, 2023.

The Central Bank introduced additional easing for banks on foreign currency

The Bank of Russia introduced additional easing on the limits of open foreign exchange positions in dollars and euros on May 13. “The Bank of Russia will refrain from taking measures against banks for non-compliance with ORP limits in US dollars and (or) euros, provided that they are multidirectional (long position against a short one and vice versa) and there is sufficient mutual compensation of these positions (the largest in absolute value of the two positions in the ruble equivalent should not exceed the smallest by more than 10%), ”the regulator said in a statement. Measures will not be applied for concomitant non-compliance with the limit of the total ORP, but not more than 15 percentage points.

The central bank explained that the easing would allow banks to internally hedge opposite open currency positions in dollars and euros, "which will reduce the cost of adjusting positions in these currencies, while the risks to capital will be sufficiently limited." The regulator emphasizes that banks should not use the opportunity provided for speculative purposes.

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At the end of February, after the EU and the US imposed sanctions against the Central Bank, it already gave banks a temporary relief on the obligation to comply with the size of open-ended reserves. Then the regulator decided until July 1 not to apply measures for non-compliance with the limits on ORP "in certain foreign currencies and precious metals, the sum of all open currency positions in foreign currencies and precious metals, as well as the balancing position in rubles" provided that the violation of the restrictions occurred due to external circumstances.