Andrey Kostin, president of state-owned VTB Bank PJSC, said that Russia's central bank should create new regulatory standards based on the Basel III principles because compliance with the international framework has become "absurd" for Russian banks.
"Basel itself, following many of its principles becomes absurd," Kostin said on Thursday in Russian in comments carried by Tass, Russia's state-owned news service.
"Why do we need Basel? Basel is such a bore," added Kostin, who was speaking at the annual meeting of the Association of Banks of Russia.
The senior banker said that the logical choice for VTB — Russia's second-largest bank — under the Basel accords is to buy U.S. Treasury bonds that the lender cannot use. He said this was as an example of how the Basel principles no longer work in the current conditions in Russia.
Russia's central bank is a member of the Basel Committee on Banking Supervision, an international standard setter for banking supervision and risk management that drew up the Basel III regulatory rulebook after the 2007-2009 financial crisis.
Russian banks and their regulators are openly debating whether to comply with Basel III international banking regulations after being cut off from global financial markets by western government sanctions.
Elvira Nabiullina, governor of the Central Bank of Russia, said at the same conference on Thursday that Moscow will continue to follow Basel III principles despite the tight economic restrictions caused by Western sanctions. But she held out the possibility for some revisions to the framework for Russian banks.
"Andrey Leonidovich [Kostin] asks me this question all the time: when will we revoke Basel?" Nabiullina said. "We are not planning to renounce the Basel standards completely."
Nabiullina said that the central bank will be "much more flexible" with the standards because of Russia's unique economic circumstances. The regulator will cooperate with the banking sector to develop regulations in areas including liquidity limits and currency positions, she said.
The central bank will put its current banking regulations under review and could implement significant changes if some regulations do not function properly while Russia is under Western sanctions. It will push forward with its proposed regulatory "innovations" on large credit risks and other problems in Russian finance and expects to implement them in 2024, Nabiullina said.
The reaction of Western nations to the invasion of Ukraine has caused some Russian banks to completely shutter their European subsidiaries.
VTB was also dropped by the London Stock Exchange when Westminster completely froze its assets immediately after the invasion of Ukraine began and has been targeted with sanctions by Britain and Europe.
--Additional reporting by Najiyya Budaly and Joel Poultney. Editing by Ed Harris.
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