Other Requirements

    Requirements for Leverage Ratio

    The leverage ratio is a simple indicator used to replenish risk-based capital adequacy requirements. The purpose of determining the leverage ratio for banks is to avoid the accumulation of excess leverage in the banking sector.

     

    The leverage ratio set by the National Bank is based on the framework defined by the internationally recognized Basel Committee on Banking Supervision. The minimum leverage requirement was set at 5%, in contrast to the Basel Committee requirement and given the country context.

     

    Risk Exposure Concentration and Large Risk Management

    Maximum requirements for risk exposures to disburse to a single borrower or an interconnected group of borrowers were set for commercial banks to avoid the concentration of credit risk and to promote the stability and sound functioning of the financial sector.

     

    Large risk requirements are based on the framework established by the Basel Committee on Banking Supervision and European Parliament and Council Regulation 575/2013 and Directive 2013/36 of 26 June 2013 on the prudential requirements for credit institutions and investment firms.

     

    Conflict of Interests Management

    The Regulation on Conflict of Interest for Commercial Banks provides for the principle of an arms-length transactions with bank-related parties, implying that transactions with related parties are conducted on terms and conditions that are no more favorable than those of unrelated parties in the same transaction.

     

    The regulation is based on the Basic Principles of Effective Banking Supervision, the document by Basel Committee on Banking Supervision, and international accounting standards.

     

    Management of Banking Book Interest Rate Risk

    The purpose of managing banking book interest rate risk is to identify, assess and manage the interest rate risk arising in the banking book. Interest rate risk reflects the impact of changes in interest rates on bank capital and profits as a result of revaluations of banking book positions. Changes in interest rates change the net present value of future cash flows, which in turn changes the respective assets, liabilities, off-balance sheet items and their economic value.

     

    Banks should calculate interest rate risk using the change in the economic value of capital and the net interest income method. The change in the economic value of banks in consideration of various shock and stress scenarios should not exceed 15% of the bank's initial capital.

     

    Other Requirements

    All other requirements set for commercial banks are available on the legal acts page.