In its turn, that would drive economic growth and drag down inflationary pressure inflicted by wage growth. Thereby, there is a set of structural measures which are not only important for the economic growth, but also may have a positive impact on inflation and, consequently, rate reduction in the economy. I would like to dedicate the second part of my statement to development of banking regulation and supervision and announce some important changes the Bank of Russia intends to introduce shortly. Let me begin with banking system challenges, the global developments affecting the Russian financial system and requiring new solutions. All over the world, the banking sector is going through a serious transformation in the aftermath of the latest global crisis: regulation has been tightened; capital burden has increased, making banks in many countries unattractive for investments. Despite soft monetary policies in the leading economies, the banking system is wary of boosting lending. Disproportionate regulation made parallel banking, including asset management, more attractive. Thereby, banks transfer risks to other market participants, though it is not always clear. Moreover, if banks give up certain activities following the new regulation, it may result in a loss of liquidity, among other things, in such an important sector as bond market. As a result, possibilities of bond offering shrink and the market becomes more volatile and exposed to shocks. Another challenge for the banking sector is a rapid fintech evolution that transforms relations between customers and financial institutions. New players (e.g., retailers) launch financial products and services.

If the Bank of Russia inspection reveals insufficiency of the available capital to cover the risks assumed taking account of stress-testing outcome, or that the low level of riskmanagement procedures does not allow banks to assess the risks assumed correctly and they may face capital shortage in future, the Bank of Russia will establish targeted elevated capital adequacy requirements for such banks. So far, stress tests conducted by banks shall meet basic requirements, but we are adjusting parameters of stress scenarios and stress-test requirements. Their outcomes will be progressively taken into account in supervisory decision-making. The outcomes of banks’ stress-testing are supposed to be taken into account in assessing possibilities of bank mergers, agreeing on a resolution plan, and taking other significant supervisory decisions. Another important line of our activity is improving the system of bank resolution. Our resolution analysis (and over the past three years we took 28 resolution decisions) shows that investors usually do not invest in capital of banks under resolution, do not develop their business and sometimes use the balance sheet of banks under resolution for bad debts while forwarding a sizeable share of funds for resolution purposes to their own projects. That is why we have tightened control over the ongoing financial resolution. Supervision will be focused on all the transactions between the bank designated as a turnaround manager and the bank under resolution. The turnaround manager will be prohibited to deteriorate financial position of the bank under resolution with its bad assets.