This project was funded by the European Union

1. BANK SUPERVISION AND ACCOUNTING Bank Supervision and Accounting An overview of Project results and possible recommendations XVth International 9 June 2006Richard Gregson Banking Congress This project was funded bythe European Union

2. BANK SUPERVISION AND ACCOUNTINGXVth 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).

3. BANK SUPERVISION AND ACCOUNTINGXVth 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

4. BANK SUPERVISION AND ACCOUNTINGXVth 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.

5. BANK SUPERVISION AND ACCOUNTINGXVth 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

6. BANK SUPERVISION AND ACCOUNTINGXVth 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

7. BANK SUPERVISION AND ACCOUNTINGXVth 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

8. BANK SUPERVISION AND ACCOUNTINGXVth 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

9. BANK SUPERVISION AND ACCOUNTINGXVth 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

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

11. BANK SUPERVISION AND ACCOUNTINGXVth 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