Other Requirements
The leverage ratio is a simple indicator and is used as a supplement to risk-based capital adequacy requirements. The purpose of determining the leverage ratio for microbanks is to avoid the accumulation of excessive leverage in the banking sector.
The leverage ratio defined by the National Bank is based on the framework established by the internationally recognized "Basel Committee on Banking Supervision." Additionally, the minimum leverage requirement has been set at 5%, taking into account the context of the country, which differs from the Basel Committee's requirement.
To avoid the concentration of credit risk and to promote the stability and healthy functioning of the financial sector, microbanks are subject to requirements regarding the maximum amount of risk positions that can be issued to a single borrower or a group of related borrowers.
Requirements related to significant risks are based on the framework established by the "Basel Committee on Banking Supervision" and the European Parliament and Council Regulation 575/2013 and Directive 2013/36 on prudential requirements for credit institutions and investment firms of June 26 2013.
The "Conflict of Interest Management Regulation" defined for microbanks ensures the conduct of transactions with related parties based on the principle of an open arm, which means conducting transactions with related parties under terms and conditions that are not more favourable than similar transactions conducted with unrelated parties in the same circumstances.
The provision is based on the "Basic Principles for Effective Banking Supervision" of the Basel Committee on Banking Supervision and International Accounting Standards.
The goal of managing the interest rate risk is to identify, assess, and manage the interest rate risk arising from the banking book. Interest rate risk reflects the impact of changes in interest rates on the bank's capital and profits, which result from the revaluation of banking book positions. As a result of changes in interest rates, the net present value of future cash flows changes, which in turn alters the corresponding assets, liabilities, off-balance sheet items, and their economic value.
The calculation of interest rate risk by microbanks should be based on the change in the economic value of capital and the net interest income method. The change in the economic value of microbanks should not exceed 15% of the bank's initial capital, considering various shock and stress scenarios.
Other requirements
All other requirements imposed on microbanks can be found on the legal acts page.