meta_id 3259700

On June 22, 2026, the Bank of Russia published a concept for reforming the regulation of subordinated instruments issued by credit organisations. The reform aims to enhance banks' ability to independently restore capital adequacy during stress periods and increase the attractiveness of subordinated debt to investors. Key innovations for banks include raising the capital adequacy trigger level at which write-down or conversion of Additional Tier 1 (AT1) subordinated debt occurs, enabling faster capital restoration mechanisms and smoother credit contraction effects during stress. The Bank of Russia will restrict interest accrual and payment when capital adequacy ratios fall below specified thresholds: 7.5 percent for H1.1, 9 percent for H1.2, and 11 percent for H1.0, allowing banks to preserve capital when most needed. The reform prohibits systemically important credit organisations (SICOs) from issuing Tier 2 (T2) subordinated instruments, which trigger only when H1.1 falls to 2 percent—an unacceptable level for SICOs. Replacing T2 instruments with new AT1 will enhance financial stability and reduce systemic risks. For investors, the concept introduces the possibility of AT1 nominal value recovery following write-down if the bank's financial condition improves, maintaining investor confidence. For floating-rate subordinated instruments, the maximum rate increases to the key rate plus 10 percentage points. The reform removes the perpetuity requirement for AT1, establishing a minimum 10-year maturity instead, improving attractiveness for investors unwilling to lock capital indefinitely. The Bank of Russia will apply these reforms only to newly issued subordinated instruments. Implementation occurs in two phases: the first phase (by January 2027) will establish regulatory frameworks enabling new triggers and rates; the second phase will introduce legislative amendments (perpetuity removal, recovery possibility, T2 prohibition for SICOs), potentially adopted in Q1 2028. The Bank of Russia invites comments and suggestions until July 15, 2026.