Bank Supervision and Accounting An overview of Project results and possible recommendations XVth International 9 June 2006 Richard Gregson Banking Congress This project was funded by the European Union

Country – beneficiary: Russian Federation; BANK SUPERVISION AND ACCOUNTING XVth International 9 June 2006 Richard Gregson Banking Congress MAIN CHARACTERISTICS OF THE PROJECT Country – beneficiary: Russian Federation;   Partner of the Project – Central Bank of the Russian Federation; Funded by: European Union; Project Duration – 2 years to September 2005 (extended until 31 December 2005).

BANK SUPERVISION AND ACCOUNTING. XVth International. 9 June 2006 BANK SUPERVISION AND ACCOUNTING XVth International 9 June 2006 Richard Gregson Banking Congress THE PROJECT CONSORTIUM PricewaterhouseCoopers The Institute of Chartered Accountants in Ireland Credit Agricole Consultants THE PROJECT BENEFICIARY The Central Bank of the Russian Federation, specifically, the Banking Regulation and Supervision Department

BANK SUPERVISION AND ACCOUNTING. XVth International. 9 June 2006 BANK SUPERVISION AND ACCOUNTING XVth International 9 June 2006 Richard Gregson Banking Congress PROJECT OBJECTIVES To facilitate further improvement of efficiency and effectiveness of supervision over the activities of financial institutions and creation of a better basis for the development of the banking sector in Russia.

Application of IFRS Approaches in Prudential Reporting BANK SUPERVISION AND ACCOUNTING XVth International 9 June 2006 Richard Gregson Banking Congress PROJECT COMPONENTS Application of IFRS Approaches in Prudential Reporting Supervision and prudential reporting Pilot banks Awareness and Training

BANK SUPERVISION AND ACCOUNTING. XVth International. 9 June 2006 BANK SUPERVISION AND ACCOUNTING XVth International 9 June 2006 Richard Gregson Banking Congress KEY RESULTS Development of an new architecture for prudential reporting and supervision methodology Development of new and revised reporting forms and subsequent testing in pilot banks Provision of recommendations for key legislative changes required to bring the legislative base of banking supervision in Russia into conformity with international practice Provision of workshops, study tours and consultations to Central Bank supervision employees

BANK SUPERVISION AND ACCOUNTING. XVth International. 9 June 2006 BANK SUPERVISION AND ACCOUNTING XVth International 9 June 2006 Richard Gregson Banking Congress SOME KEY RECOMMENDATIONS Restructure the architecture of the reports submitted by banks Move to risk-focused supervision Improve infrastructure within the function of supervision Enhance the approach to analyzing the reports submitted to the CBRF Improve the level of coordination between on and off-site supervision

BANK SUPERVISION AND ACCOUNTING. XVth International. 9 June 2006 BANK SUPERVISION AND ACCOUNTING XVth International 9 June 2006 Richard Gregson Banking Congress SOME KEY RECOMMENDATIONS Restructure the architecture of the reports submitted by banks Move to risk-focused supervision Improve infrastructure within the function of supervision Enhance the approach to analyzing the reports submitted to the CBRF Improve the level of coordination between on and off-site supervision

BANK SUPERVISION AND ACCOUNTING. XVth International. 9 June 2006 BANK SUPERVISION AND ACCOUNTING XVth International 9 June 2006 Richard Gregson Banking Congress PRINCIPLES OF PROPOSED NEW ARCHITECTURE IFRS basis Prudential specificities International practice Russian environment Differentiated reporting Dynamic information Periodicity of reports

BANK SUPERVISION AND ACCOUNTING. XVth International. 9 June 2006 BANK SUPERVISION AND ACCOUNTING XVth International 9 June 2006 Richard Gregson Banking Congress THE BASIS OF THE PROPOSED ARCHITECTURE Activity Risks Financial Structure Profitability

BANK SUPERVISION AND ACCOUNTING. XVth International. 9 June 2006 BANK SUPERVISION AND ACCOUNTING XVth International 9 June 2006 Richard Gregson Banking Congress WHERE TO NEXT? Analysis and implementation Phased convergence with the principles of Basle II by 2009/ 2010