Results of the comprehensive asset-assessment exercise As you probably all know, the European bank assessment exercise, covering 130 banks, most of which will be directly overseen by the SSM, essentially comprised two components. First, an asset quality review (the AQR), which basically involved an analysis of the rigour with which bank balance sheets reflect the value of different assets. The review evaluated, as appropriate, accounting classifications, collateral values, fair value calculation methods and the recognition of borrowers’ impaired creditworthiness. Second, a stress test, evaluating how solvency would fare in two macroeconomic scenarios: a baseline scenario, considered likely, and another highly adverse scenario. BIS central bankers’ speeches  1  In addition to increasing the transparency of banks’ financial position and to providing information to help ensure the effective functioning of the SSM as a supervisory authority from the outset, the analysis aimed to detect potential capital shortfalls that needed to be rapidly redressed. To do this, quantitative benchmarks were set for capital adequacy ratios – measured by the ratio of common equity tier 1 (CET1) capital to risk-weighted assets – for each part of the exercise (8% in the AQR and in the baseline scenario of the stress test, and 5.5% for the adverse scenario). The exercise was designed to high standards. This was manifest in the breadth of the field work done for the review of bank balance sheets, in the severity of the adverse macroeconomic scenario envisaged and in the wide range of risk (credit, market, sovereign, etc.) factors considered.

At the same time, while anti-crisis budget measures were particularly important during the period of restrictions and will be curtailed in future, accommodative monetary policy will continue to operate next year to support the Russian economy. I would also like to emphasise that both fiscal and monetary policies play a countercyclical role, that is, they address the issue of overcoming the downturn and bringing the economy back to its potential. This is certainly a top-priority task in the current situation, yet it is critical to remember what is absolutely essential for sustainable long-term development and an increase in economic potential, labour productivity and, accordingly, households’ incomes. To tackle this task, we need incentives to increase private investments and develop private initiatives and should enhance the flexibility of the labour market, which primarily depends on the business climate and other structural factors. The level of our economic potential after the pandemic and how quickly the economy will regain it are crucial for both our macroeconomic forecast and monetary policy. As you know, this uncertainty of supply- and demand-side factors is a key point in our forecast scenarios. They are presented in the draft Monetary Policy Guidelines for 2021– 2023 published last week. We are going to update our forecast estimates following the Board of Directors’ meeting scheduled for October. Yet, our approaches to the set of scenarios and key forecast assumptions in the scenarios will remain unchanged. Winding up, I would like to make my traditional comments on monetary policy prospects.