Implementation of international standards of the Basel Committee on Banking Supervision in the Republic of Belarus

The National Bank constantly performs activities to enhance the efficiency of banking supervision and improve prudential requirements and procedures in relation to the Belarusian banking sector by introducing international standards, including those developed by the Basel Committee on Banking Supervision.

The minimum risk-based capital requirements have been established to cover the major risks (credit, market, and operational) using approaches consistent with the approaches of Pillar 1 “Minimum Capital Requirements” of Basel II, namely:

  • credit risk - a standardized approach based on external ratings of borrowers (subject to some changes in accordance with Basel III);
  • market risk (interest rate risk, equity risk, foreign exchange risk, commodities risk) - a standardized approach; and
  • operational risk - basic indicator approach (it is also allowed to use a standardized approach since 2009, subject to the consent of the National Bank).

Currently, the following regulatory capital adequacy ratios have been established:

  • Tier I capital adequacy ratio (no less than 4.5%);
  • Tier I capital adequacy ratio, taking into account the conservation buffer (no less than 7%);
  • Tier I capital adequacy ratio, taking into account the conservation buffer and countercyclical buffer (no less than 7%);
  • Tier I capital adequacy ratio, taking into account the conservation buffer, countercyclical buffer and systemic importance buffer (no less than 8.5% and no less than 8.0%, depending on the bank’s group of systemic importance);
  • Tier I capital adequacy ratio (no less than 8.5% and no less than 8.0% depending on the bank’s group of systemic importance, no less than 7% for other banks);
  • regulatory capital adequacy ratio (no less than 10%); and
  • regulatory capital adequacy ratio, taking into account the conservation buffer (no less than 12.5%).

The value of the capital conservation buffer totals 2.5 percentage points.

The countercyclical capital buffer is currently set at 0%.

The systemic importance buffer amounts to:

  • 1.5 percentage points – for systemically important banks of group of importance I; and
  • 1 percentage point – for systemically important banks of group of importance II.

The methodology for determining systemically important banks has been developed on the basis of the Basel Committee on Banking Supervision standards, taking into account the peculiarities of the Belarusian banking system.

The leverage ratio is set at 3%.

Basel III liquidity ratios have been introduced as secure functioning requirements: liquidity coverage ratio (LCR, at 100%) and net stable funding ratio (NSFR, at 100%). The requirements for the presentation of analytical information on liquidity risk monitoring tools have been established as well.

Within the framework of Pillar 2 “Supervisory Review Process” of Basel II, the requirements for the organization by banks of an internal capital adequacy assessment process (ICAAP) are established, and the process for the National Bank to conduct a supervisory review and evaluation process (SREP) is regulated.

Approaches to the implementation of the banking supervision functions by the National Bank using an early warning system have been introduced.

Requirements for the organization of corporate governance and risk management systems, internal control system, requirements for the qualification and business reputation of members of the bank’s management bodies, including the board of directors, have been established.

The requirements for the organization of corporate governance include the minimum requirements for the organization of the system of remuneration and compensation at banks, based on international standards.

The concept of “cyber risk” has been introduced, the sources of its occurrence are indicated. All requirements for organizing the management of the major types of risks apply to the cyber risk.

The criteria (conditions) for assigning the functions transferred by banks to outsourcing and critical functions, the transfer of which to outsourcing is not allowed, have been determined, as well as the requirements to limit the risks associated with the outsourcing have been specified.

Within the framework of Pillar 3 “Market Discipline” of Basel II a list of mandatory information to be submitted by banks on the events in their activities that are significant for the purposes of banking supervision, especially unfavorable ones, is determined. Requirements have been defined for the composition and scope of information posted on the bank’s website.

Given the recommendations of the Basel Committee on Banking Supervision, letters with recommendations have been submitted to banks with regard to:

  • improving credit risk management at banks;
  • improving the management of interest rate risk at banks;
  • improving the management of risks associated with outsourcing in the field of financial services;
  • improving the practice of stress-testing at banks;
  • improving the management of operational risk at banks;
  • organizing the risk management system at banks;
  • improving liquidity risk management at banks;
  • improving risk reporting;
  • improving the management of the interest rate risk of the banking portfolio;
  • improving external and internal audit, the activities of audit committees at banks and their interaction with the supervisory authority;
  • organizing the work with non-performing assets; and
  • improving cyber risk management.

The documents of the National Bank, in line with which the international standards of the Basel Committee on Banking Supervision have been implemented, are available in the section LEGISLATION → Rubricator and searching legislation section → Banking supervision.