Capital benefits

Concluding deals on the standardised derivatives market gived participants advantages.

Example

Model deal parameters

Deal type RUB interest swap
Nominal RUB 100 mln
Contract term (fixed rate) Three years
Percent review term (floating rate) Three months
Instrument volatility* 5,00%
Initial margin 7,8%

When calculating credit and market risk which influence N1, the following ratios are used

Bank of Russia instructiojn N 139-I from 3 December 2012

Percantage of funds transferred
to fulfil obligations (code 8846/8847)**
5%
Weighting ratio of derivative deal credit risk
on the counterparty thatis the central counterparty
and meets the conditions of code 8846**
0,05
Potential derivatives deal risk 0,005

Bank of Russia provision 387-P от 28 September 2012

Time interval (one-three months), weighting ratio 0,20%
Time interval (two-three years), weighting ratio 1,75%
Closure of weighted position between zones 1 and 2 40%

Example of calcualtion of credit and market risk influencing N1***

RUB interest swap Exchange
CCP deal
Non exchange
with CCP *****
Non exchange
without CCP (Ba******)
Credit risk on derivaties deals
with counterparty weighting ratio 
Not calculated RUB 275,000 RUB 5,500,000
Curent credit risk RUB 5,000,000 RUB 5,000,000
Potential credit risk RUB 500,000 RUB 500,000
Credit risk on initial margin**** RUB 390,000 RUB 390,000 Not calculated
Closed position RUB 200,000 RUB 200,000 RUB 200,000
Open position for general interest risk (100%) RUB 1,550,000 RUB 1,550,000 RUB 1,550,000
Closed weighted position for position
between zones 1 and 2 (for general interest risk)
RUB 80,000 RUB 80,000 RUB 80,000
Market risk  RUB 1,630,000 RUB 1,630,000 RUB 1,630,000
Discount (Dj) Not calculated Not calculated 0,929
Ai 306,442
RSK ******* RUB 8,929,136
TOTAL influnece on N1 ratio RUB 2,020,000 RUB 2,295,000 RUB 16,055,138

* Maximum revaluation of instrument cost in percentage of nominal

** In accordance with data published at http://www.cbr.ru/credit/cicc.asp
    http://www.cbr.ru/pw.aspx?file=/press/if/131023_171237intern3.htm

*** for clear accounting, the funding ratio is taken as 1

**** Without the Guarantee Fund, i.e. an example is given of just one of many deals

***** The size of credit risk on derivaties deals may be reduced when concluding numerous multidirectional deals included in the netting agreement. The reduction in credit risk on derivaties deals is not calculated, as  an example is given of just one of many deals.

Ва****** Moody's Investors Service

******* RSK - is the magnitude of the risk of changes in value of the credit requirements as a result of deterioration the credit quality of the counterparty