38. Capital Adequacy Ratio

The Group’s objectives when managing capital are (i) to comply with the regulatory capital requirements set by the Bank of Russia and (ii) to safeguard the Group’s ability to continue as an ongoing concern. The Group also monitors the capital adequacy ratio based on the Basel Accord to make sure it maintains a level of at least 8%.

Under the current capital requirements set by the Bank of Russia, banks have to maintain a ratio of regulatory capital to risk weighted assets (“statutory capital ratio”) above a prescribed minimum level. According to requirements set by the Bank of Russia, statutory capital ratio has to be maintained above the minimum level of 10%. The Bank’s Assets and Liabilities Management Committee (ALMC) sets the minimum level of the capital ratio to 11%. This level exceeds both the minimum level set by the Bank of Russia (10%) and Basel Committee (8%) and allows the Bank to participate in the State deposit insurance scheme, which was introduced by the Federal Law №177- FZ “Guarantees on Bank Deposits of Individuals in the Russian Federation” dated 23 December 2003. As at 31 December 2011 the regulatory capital adequacy ratio was 15.0% (31 December 2010: 17.7%). Compliance with capital adequacy ratios set by the Bank of Russia is monitored monthly with reports outlining the calculation. Regulatory capital based on the Bank’s reports prepared under Russian accounting standards totalled RR 1 515 780 mln as of 31 December 2011 (2010: RR 1 241 876 mln).

As at 31 December 2011 and 31 December 2010, Capital Adequacy Ratios calculated by the Group in accordance with the International Convergence of Capital Measurement and Capital Standards (July 1988, updated to November 2005) and Amendment to the Capital Accord to incorporate market risks (updated November 2005), commonly known as Basel 1 requirements, were as follows:

In mln of Russian Roubles 2011 2010
Tier 1 capital    
Share capital 87,742 87,742
Share premium 232,553 232,553
Retained earnings 882,766 585,819
Treasury shares (6,962) -
Less goodwill (15,050) (8,251)
Total Tier 1 capital 1,181,049 897,863
Tier 2 capital    
Revaluation reserve for premises 81,527 53,648
Fair value reserve for investment securities available for sale (3,357) 13,437
Foreign currency translation reserve (5,692) (1,136)
Subordinated capital 303,518 303,513
Less investments in associates (4,677) (2,479)
Total Tier 2 capital 371,319 366,983
Total capital 1,552,368 1,264,846
Risk weighted assets (RWA)    
Credit risk 9,867,778 7,327,090
Market risk 349,064 199,883
Total risk weighted assets (RWA) 10,216,842 7,526,973
Core capital adequacy ratio (Total Tier 1 capital to Total RWA) 11.6 11.9
Total capital adequacy ratio (Total capital to Total RWA) 15.2 16.8

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