Capital Adequacy

Capital adequacy in accordance with the Basel Capital Accord is presented in the table below.

RUB m (unless stated otherwise) As of 31 December 2010 As of 31 December 2009
Core capital adequacy ratio 11.9% 11.5%
Total capital adequacy ratio 16.8% 18.1%
CAPITAL COMPONENTS    
Core capital (Tier 1)    
Share capital 87,742 87,742
Share premium 232,553 232,553
Retained earnings 585,819 403,934
Less — Goodwill (8,251) (469)
Supplementary capital (Tier 2)    
Revaluation reserve for office premises 53,648 55,540
Fair value reserve for investment securities available for sale 13,437 (329)
Foreign currency translation reserve (1,136) (1,009)
Subordinated capital 303,513 362,115
Less — Investments in associates (2,479) (31)
Total capital 1,264,846 1,140,046
Risk-weighted assets 7,526,973 6,303,813

In 2010, the Group’s core capital adequacy ratio increased by 0.4 p.p. to 11.9%. Retained earnings grew faster than risk-weighted assets in 2010 and this resulted in the Group having a higher core capital adequacy ratio.

Taking into account a substantial increase in customer funds and a high capital adequacy ratio, in May 2010 the Group paid back a RUB 200bn tranche of the RUB 500bn subordinated loan it received from the Bank of Russia in the fourth quarter of 2008. The partial repayment of the subordinated loan caused a reduction in the Group’s Tier 2 capital and, therefore, the total capital adequacy ratio declined by 1.3 p.p. to 16.8% in 2010. However, the capital adequacy ratio is notably higher than the minimum 8% ratio set by the Basel Committee.

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