Russian C-bank Introduces Capital Adequacy Ratio for Forex Brokers

Fazzaco learned that the Central Bank of Russia has introduced a capital adequacy ratio for professional market participants including brokers, dealers, asset managers and Forex dealers, effective October 1, 2021.

The capital adequacy ratio is calculated on a monthly basis as the capital to risk-weighted assets ratio, subject to the adjustment factor, and should be maintained on a permanent basis. This framework will enable professional market participants to cover potential financial losses at their own expense if credit or market risks materialise.

The ratio is planned to be set in stages. From 1 October 2021, the minimum acceptable value will be 4%, increasing to 6% from 1 April 2022 and thereafter to 8% from 1 October 2022.

Also, market participants will be subject to the banking equivalent of provisioning for credit claims. Brokers are currently free of such requirements; yet, similar to banks, they have refund obligations to customers and can use customer funds to issue loans and make repo transactions. Where claims are secured by high-quality assets, it will be allowed to reduce provisions.

'Provisioning is to improve the portfolio of instruments in which brokers will invest, in their own interests, clients' money', says Vladimir Chistyukhin, Deputy Governor of the Bank of Russia. 'It is important that brokers are responsible to a client under claims arising from the use of client assets. They should be placed either in steadier companies with the lowest credit risk or in inherently higher-quality instruments.'