RUSSIAN FINANCIAL SECTOR INVESTOR PRESENTATION

March 2021 2

CONTENTS

Evolution – 4 Key indicators – 14 Financial market development Reforms – 7 Macrofinance – 15 strategy – 24 Compliance with international Inflation – 16 Banking sector – 25 standards – 8 Inflation expectations – 17 Microfinance – 38 International cooperation – 9 Economic forecasts – 18 Financial stability – 39 Newsletter – 10 Monetary policy – 20 Securities market – 40 International reserves – 22 Corporate governance – 46 Countering malpractice – 47 Investment funds – 48 Non-state pension funds – 49 Insurance – 50 Payment infrastructure – 51

Russian Macro Update Update Macro Russian Fintech – 56 Russian Financial Sector Financial Russian Marketplace – 57

Bank of Russia: Overview Russia: of Bank Consumer protection – 58 Financial inclusion – 59 AML/CFT – 60 Cybersecurity – 61 1 BANK OF RUSSIA: OVERVIEW BANK OF RUSSIA: OVERVIEW 4

EVOLUTION (1)

2013 – CBR becomes an IAIS member as well as IOSCO member 2001 – Law on AML/CFT 2014 – Inflation targeting regime with 4% medium-term target rate 2002 – Law on the Central Bank of the Russian – Introduction of a floating exchange rate regime Federation – Approval of a new corporate governance code – National Card Payment System Joint-Stock Company Central Bank of Russia 2003 – Russia becomes a FATF member (AO NSPK) established (CBR): founded in 1990 – Start of the IFRS reporting project – Law on deposit insurance 2015 – Signing of the IOSCO Multilateral Memorandum of 2005 – Introduction of corridor for USD&EUR basket Understanding within the exchange rate policy framework – National payment system “Mir” established and “Mir” 1990 – Law on banks and banking activities card issue started – Law on Central bank of RSFSR 2009 – CBR becomes a BCBS member – CBR becomes a CPMI member 2016 – Banking regulation in Russia assessed as compliant with 1992 – Russia becomes an IMF member Basel II, Basel 2.5 and Basel III (RCAP) 2010 – Introduction of floating exchange rate 1995 – Law on Central bank of RSFSR: amendments corridor 2017 – Introduction of proportional regulation in banking sector – Introduction of new financial rehabilitation mechanism 1996 – CBR becomes a BIS member 2011 – Law on National Payment System 2018 – Bank of Russia joins MMoU IAIS

1990 1995 2000 2005 2010 2015 2020 Focus on Russian financial market 1992 – MICEX established 2002 – First edition of the Russian corporate conduct code development – Law on insurance business 2003 – Law on mortgage-backed securities 1995 – RTS exchange established 2011 – Law on insider trading 1996 – Law on securities market – MICEX and RTS merge into the Moscow Exchange 2013 1996 – Law on joint-stock companies – FISS joins FFMS and the latter becomes insurance market regulator CBR becomes the 1999 – Law on protection of rights of megaregulator of securities market investors 2012 – National Settlement Depository obtains status of the Central the Russian Securities Depository (CSD) of Russia financial sector 2013 – National Clearing Center obtains status of the first qualified Federal Financial Markets Central Counterparty (CCP) in Russia Service (FFMS): founded in 1993 BANK OF RUSSIA: OVERVIEW 5

EVOLUTION (2) Monetary policy framework development

2006 2008 2009 2012 2013 2014 Inflation targeting Active inflation Liquidity Transition deadline Key rate Floating exchange announced targeting management set introduced rate introduced Dec 2018 Dec 2019 Feb 2021 communications Inflation targeting is Instruments are “Floating rate and Inflation 4.3% Inflation 3.0% Inflation 5.7% represented as a developed, the inflation targeting by midterm goal in the interest rate corridor 2015” “Monetary Policy is narrowed Guidelines”

2015 1998 - 2008 2008 - 2014 Transition to the inflation Narrow band Flexible band targeting regime is completed Medium-term inflation target is around 4% Since Nov. 2014 Monetary policy framework development Free floating Ruble Exchange rate regime development BANK OF RUSSIA: OVERVIEW 6

EVOLUTION (3) Bank of Russia supervises the following key segments

Payment Non-state pension Banking sector infrastructure funds

Market Securities market, infrastructure, Asset managers including securities including fair pricing market professionals

Credit rating Microfinance Insurance sector agencies BANK OF RUSSIA: OVERVIEW 7

REFORMS Promoting price and financial stability, fair competition, cutting edge technologies and best practices

Monetary policy Market infrastructure ‒ Benefits from infrastructure put in place, tax and Inflation targeting regime adopted with a 4% medium- regulatory reforms (T+2, CSD and access of ICSDs, up-to- term target rate pursued using conventional monetary date CCP, Individual Investment Accounts) policy instruments ‒ Marketplace project infrastructure – personal finance platform ‘Finuslugi’ launched in October 2020 Banking regulation and supervision Corporate governance ‒ Banking sector rehabilitation in progress, new bank resolution mechanism introduced JS companies segregation into public and non-public, ‒ Proportional regulation introduced and an corporate actions reform, new corporate governance code advanced IRB approach for the largest banks adopted in 2014, listing rules based on the new corporate gradually phased in governance code, listing committees established ‒ Banking regulation compliant with the Basel II, Payment infrastructure Basel 2.5 and Basel III standards, maintaining ‒ Russian payment system infrastructure developed and AML/CFT supervision of credit and non-credit currently in use by all leading international payment financial institutions (according to the Regulatory systems Consistency Assessment Program (RCAP) 2016) ‒ Payment infrastructure monitoring and supervision ‒ New macroprudential regulation mechanism in ‒ System for transfer of financial messages (SPFS) has been force – add-ons to risk ratios are introduced and developed set by the Bank of Russia Board of Directors ‒ The Faster Payments System launched in January 2019 ‒ Introduction of PTI ratio for macroprudential regulation purposes starting October 1, 2019 Pension system ‒ Setting up a national rating industry - only credit ‒ Guarantee fund mechanism introduced ratings of Russian national agencies may be used for ‒ Investment horizon for non-state pension funds regulatory purposes extended to 5 years ‒ Introduction of new voluntary personal pension plan (simple and standard) is being discussed BANK OF RUSSIA: OVERVIEW 8

COMPLIANCE WITH INTERNATIONAL STANDARDS Russia complies with or implements key international standards and best practices

Russia’s Anti-Money Laundering system is Banking regulation is compliant with compliant with FATF Recommendations Basel II, 2.5 and Basel III (RCAP 2016)

Bank for International Settlements, IAIS and IOSCO Principles for financial market infrastructures (PFMI) are being High FSAP grades in all surveyed segments, implemented including securities market, insurance and Upon monitoring the implementation of the payment infrastructure PFMI, the CPMI gave Russia the highest- possible ‘4’ rating The BoR payment system fully complies with the PFMI. Russia advanced to #28 in global DOING BUSINESS-2020 rankings from 31st in the 2019 report National Settlement Depository is eligible (#35 in 2018, #40 in 2017) for custody arrangements under Rule 17f-7 of the US Investment Company Act of 1940

Russia is a party to the Articles of Insurance sector has started implementing Agreement of the IMF and upholds free Solvency II European principles movement of capital BANK OF RUSSIA: OVERVIEW 9

INTERNATIONAL COOPERATION Bank of Russia cooperates with international financial institutions, regulators and associations Multilateral cooperation

G20

Financial market authorities Regional financial integration BRICS BANK OF RUSSIA: OVERVIEW 10

NEWSLETTER (1) Key news from the Russian financial market 3 March 2021: The Bank of Russia has unveiled a consultation paper exploring potential regulatory approaches to mortgage March 2021 loans with floating interest rates, aiming to protect borrower interests and prevent financial stability risks in the future. 25 February 2021: The Bank of Russia Board of Directors has decided to change the parameters of an irrevocable credit line (ICL) that the Bank of Russia opens for SICIs starting from 1 April 2021: (1) The fee for an ICL opening from 1 April 2021 is set as follows: from 1 April 2021 to 30 September 2021 — 0.15% per year of the maximum ICL limit set for SICIs; starting from 1 October 2021 — 0.5% per year of the maximum ICL limit set for SICIs. For ICLs opened earlier, the fee will be kept unchanged until their expiry; (2) From 1 April 2021, the maximum total limit for ICLs will be Rub 4 tn. 17 February 2021: The changes proposed to the Bank of Russia Regulation No. 199-I will enable a wider use of government guarantees of the Russian Federation to reduce credit exposure in calculating required ratios in the case of ruble claims secured by ruble-denominated government guarantees. 11 February 2021: According to a draft Bank of Russia ordinance, limits that banks set for their customers’ daily operations in the Faster Payments System (FPS) should not be less than Rub 150 thousand. Banks will have to adjust their limits by 1 February 2021 October 2021. This will improve the availability of FPS transfers for individuals. 3 February 2021: Credit institutions will be allowed to measure operational risk for calculating their capital adequacy ratios in compliance with Basel III. The new standardised approach involves the usage of a loss threshold. According to banks, this will enable them to save a part of capital allocated to cover operational risk. Banks with a universal license shall comply with the new rules beginning on 1 January 2023. Banks with a basic license and non-bank credit institutions will be allowed to choose at their own discretion whether to apply the existing rules or switch to the new regulation for calculating their ratios. 1 February 2021: the Bank of Russia published its 2021-22 Road map for the Development of Financing for Small and Midsize Enterprises (SMEs). The SME financing road map includes measures to improve banks' procedures for assessing SME borrowers, standardize processes for issuing bank guarantees for SMEs, streamline SMEs' access to subsidised lending and improve SMEs' financial literacy. 20 January 2021: The Bank of Russia has laid out key objectives in refining debt-to-income (DTI) ratio calculation for 2021- 2022. There are plans to develop and propose legislation to make lenders legally obliged to calculate the DTI ratio. In addition, January 2021 the roadmap provides for the potential introduction of a new macroprudential toolset to ensure quantitative restrictions are in place on the share of high-risk loans, in particular, unsecured consumer loans issued to high-DTI borrowers. 21 December 2020: Under the Bank of Russia Regulation No. 730-P, effective from 2021, banks that have switched to December 2020 the internal ratings-based approach (IRB approach) to calculating regulatory capital requirements are authorised to use their own credit risk assessment methodology and models in the creation of provisions. BANK OF RUSSIA: OVERVIEW 11 NEWSLETTER (2) Key news from the Russian financial market

15 October 2020: Effective from 1 April 2021, under the Bank of Russia Regulation No. 729-P (a new version of Regulation No. 509-P) banking groups will be able to use a new standardised approach to measuring credit risk for the calculation of October 2020 capital adequacy ratios. This will allow credit institutions that are parts of such groups to free capital, expanding their capabilities to lend to the real sector of the economy. 10 August 2020: The Bank of Russia reduced risk weight add-ons for unsecured consumer loans in rubles issued starting 1 September 2020. The changes will mostly apply to borrowers with lower levels of PTI. The Bank of Russia extended the following temporary regulatory forbearance measures until 31 December 2020: • (i) Banks are allowed not to accrue loan loss provisions and not to calculate the borrower’s PTI for retail borrowers whose financial situation has worsened following the pandemic, as well as for restructured loans (both under Federal Law No. 106- FZ and in-house programmes); (ii) Banks are allowed not to apply risk weight add-ons to retail loans if the borrowers have a August 2020 confirmed COVID-19 case; (iii) Banks are allowed not to accrue loan loss provisions for SME loans restructured due to the coronavirus pandemic and to maintain the quality assessment as of 1 February 2020. • Loan loss provisions should be created in full under restructured retail and SME loans until 1 July 2021. • Banks are entitled to delay loan loss provisioning until 1 April 2021 for corporate loans restructured due to the coronavirus pandemic and to maintain the quality assessment as of 1 January 2020 if collateral is classified into I or II category. • Until 2022 banks are allowed not to apply risk weight add-ons to FX loans issued to manufacturers of pharmaceuticals, medical products and equipment. Risk weights for investments in FX debt securities of such organisations are also set free from the add-ons made during the above-mentioned period. 24 July 2020: The Bank of Russia approved a fast-track implementation of credit risk assessment approach under Basel III standard for mortgage loans. Risk weights are set in the range from 20% to 100% depending on the values of LTV and PTI ratios (earlier, risk ratios were set in the 35-100% range). Temporary regulatory easing: July 2020 • To stimulate the activity during the recovery period and afterwards the risk weight for investments in subordinated debt of non-financial organizations (including perpetual) will be reduced from 150% to 100% till mid-2025. • To stimulate banks to settle problem loans of systemically important companies through a compensation or share pledge (a debt/equity swap) the Bank of Russia will lower the risk weight for investments in equity of systemically important companies received under the abovementioned arrangements from 150% to 100% till mid-2022. BANK OF RUSSIA: OVERVIEW 12

NEWSLETTER (3) Key news from the Russian financial market 14 May 2020: The Bank of Russia launched long-term 1-month and 1-year ruble repo auctions. May 2020 12 May 2020: The State Duma adopted a bill in the second reading to increase the maximum amount of insurance compensation for individuals’ deposits in some cases to Rub 10 mln. 6 April 2020: Fine-tuning repo auction in the amount of Rub 500 bln. April 2020 3 April 2020: The Bank of Russia cancelled add-ons to risk weights for mortgage loans and loans for construction co- funding granted in rubles before 1 April 2020. 20 March 2020: Temporary regulatory forbearance: • The Bank of Russia eased N26 (N27) liquidity coverage ratio and conditions under irrevocable credit lines for SIFIs with total limit raised to Rub 5 tn for the period from 1 April 2020 through 31 March 2021. March 2020 • The Bank of Russia decided to postpone several amendments to the regulation of credit institutions, incl. the introduction of the large exposures concentration ratio (N30) until 1 January 2022. • The Bank of Russia reduced risk-weight add-ons for mortgage loans and loans for construction co-funding with downpayment from 15 to 20% granted in rubles from 1 April 2020 from 100 to 20-80 p.p. depending on the PTI ratio. New standardised approach to credit risk assessment in accordance with “Basel III: Finalising post-crisis reforms”: • Corporate exposures received a 100% risk weight, except: (1) “investment class” corporates (65%); (2) 85% risk weight for claims to small and medium-sized enterprises (SMEs) assessed on an individual basis, with the current 75% risk weight remaining for SMEs assessed on a portfolio basis; and (3) ‘special-purpose lending’ class with differentiated risk ratios (80-130%) depending on a lending type (project finance, object or commodity finance). • Earlier, in June 2019, lower risk-weights for sovereign exposures in foreign currency and for lending with export guarantees were introduced (50% instead of 100%). 1 January 2020 • Higher risk ratios (instead of the current 150% ratio) applies to investments in legal entities’ unlisted shares (stocks): 400% for short-term speculative investments and 250% for other investments (with a five-year transition period established). • For loans invested by borrowers in other legal entities’ authorised capital, the risk ratio has been increased from the current 150% to 200%, effective 1 January 2020. • Effective from 1 January 2021, 150% risk ratio set for the unsecured part of default loans (without collateral recognised to reduce credit risk) where estimated loan loss provision is below 20%. • The total insider risk ratio (N10.1) has been cancelled. 2 RUSSIAN MACRO UPDATE RUSSIAN MACRO UPDATE 14

KEY INDICATORS Russian economy started to recover in 2016 and moderated in 2019 Figure 1: Real GDP growth dynamics (YoY, %) Figure 2: Private consumption and investment dynamics (YoY, %)

Private consumption Investments 7.0 15 4.3 5.0 3.7 4.0 9.1 10 7.9 2.5 5.2 6.0 1.8 3.0 3.0 1.8 3.0 2.0 2.3 2.5 5.2 0.7 5 6.8 0.3 0.7 5.0 1.0 5.0 5.5 3.2 0 2.9 1.3 1.5 -1.0 -1.9 -6.2 -2.0 -5 -1.8 -3.0 -10 -9.4 -3.1 -11.2 -8.6 -5.0 -15 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021F 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Е 2021F

Figure 3: Russian Ruble volatility remains low while in free-floating Figure 4: Retail sales and real wages dynamics (YoY, %)

Real wages Retail sales 90 15 80 74.26 4.6 70 5

60 -5 -3.6 50 RUB RUB per USD 1 -15 40

30 -25

1

.2

12.20

07.15 10.15 01.16 04.16 07.16 10.16 01.17 04.17 07.17 10.17 01.18 04.18 07.18 10.18 01.19 04.19 07.19 10.19 01.20 04.20 07.20 10.20

10.15 01.16 04.16 07.16 10.16 01.17 04.17 07.17 10.17 01.18 04.18 07.18 10.18 01.19 04.19 07.19 10.19 01.20 04.20 07.20 10.20 01.21 03

Source: Bank of Russia, Rosstat RUSSIAN MACRO UPDATE 15

MACROFINANCE Solid fiscal and external positions Figure 5: As estimated by the Bank of Russia, current account surplus Figure 6: Strong fiscal position: budget consolidation and fiscal rule amounted to USD 33 bn in 2020 Russian Federal Budget Balance, % of GDP, lhs Urals, $/bbl, rhs 120 113 12.0 120 97 100 8.0 100 80 71 4.0 2.6 67 68 65 1.8 58 0.4 80 60 - -0.2 -0.8 60 40 33 33 33 -4.0 -0.7 24 -1.3 -3.9 -2.8 -3.9 40 20 -8.0 -4.3 -6.0 0 -12.0 20 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Figure 7: Significant international reserves assuring financial stability Figure 8: Sovereign debt to GDP lowest in both EM and DM spaces

External debt, $bn Reserves, $bn Developed countries Emerging countries Russia 800 External debt/GDP 2019 = 27% 120% 700 Reserves/GDP 2019 = 34% 98% 104% Reserves cover 22 months of import 583.4 100% 600 80% 500 463.7 60% 52% 400 38% 40% 300 20% 200 8% 14%

0%

09.13 12.13 03.14 06.14 09.14 12.14 03.15 06.15 09.15 12.15 03.16 06.16 09.16 12.16 03.17 06.17 09.17 12.17 03.18 06.18 09.18 12.18 03.19 06.19 09.19 12.19 03.20 06.20 09.20 06.13 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: Bank of Russia, Bloomberg, Ministry of Finance, IMF RUSSIAN MACRO UPDATE 16

INFLATION Medium-term inflation target is set at around 4% Figure 9: Inflation (YoY, %)

CPI Non-food products Food Services Key rate Medium-term inflation target 20% 20%

18% 18%

16% 16%

14% 14%

12% 12%

10% 10%

8% 8%

6% 5.7%*6%

4% 4% Medium-term inflation target 2% 2%

0% 0% 06.15 11.15 04.16 09.16 02.17 07.17 12.17 05.18 10.18 03.19 08.19 01.20 06.20 11.20

Source: Bank of Russia, Rosstat *Inflation is 5.7% as of February, 2021 RUSSIAN MACRO UPDATE 17

INFLATION EXPECTATIONS Inflation expectations of households and businesses remain elevated

2018 2019 2020 2021 Expect. horizon I II III IV I II III IV I II III Oct Nov Dec Jan Feb Inflation expectations (absolute numbers), % Households FOM (median, expected inflation) Next 12 months 8.5 9.8 10.1 10.2 9.1 9.4 8.9 9.0 7.9 - 8.9 9.7 10.1 12.0 12.8 12.3 FOM (subgroup with savings) Next 12 months 8.0 9.0 9.2 9.1 8.0 8.3 8.4 8.3 6.9 - 8.1 9.0 9.6 10.9 11.1 10.8

FOM (subgroup without savings) Next 12 months 8.8 10.3 10.5 10.8 9.8 10.0 9.2 9.4 8.5 - 9.6 10.0 10.6 12.0 13.2 12.5

FOM (median, observed inflation) Past 12 months 9.2 10.6 10.2 10.2 10.0 10.2 9.9 9.4 8.3 - 9.4 9.6 10.7 11.5 10.5 9.9 FOM (subgroup with savings) Past 12 months 8.4 9.7 10.0 9.2 9.2 9.0 9.4 8.7 7.2 - 8.5 9.1 10.0 10.6 9.3 8.8

FOM (subgroup without savings) Past 12 months 9.6 11.2 10.4 10.8 10.8 11.1 10.4 9.6 8.6 - 9.9 9.8 11.2 11.7 11.1 10.8 Professional analysts Bloomberg 2021 4.0 3.6 3.9 3.9 3.5 3.7 3.7 3.7 Bloomberg 2022 3.9 3.7 3.8 3.8 3.8 4.3 4.3 4.3 Financial markets OFZ IN (option not subtracted) 2023 3.9 4.7 5.5 5.1 4.6 3.9 3.2 2.8 3.5 2.3 2.6 2.6 3.5 2.6 3.1 3.3 OFZ IN (option not subtracted) 2028 4.7 5.5 5.2 4.9 4.1 3.5 3.4 4.1 3.0 3.5 3.3 3.8 3.2 3.6 3.8 Inflation expectations (balanced index*) Businesses Bank of Russia monitoring Next 3 months 6.8 10.2 12.6 16.5 10.6 9.9 8.3 8.5 18.1 15.1 17.5 20.3 20.5 19.0 18.3 19.1 PMI M, input prices, diff. index Current month … 70.3 69.1 62.5 66.2 54.6 54.3 54.0 59.8 58.8 63.3 72.5 77.1 78.5 72.9 76.8 PMI M, output prices, diff. index Current month … 56.6 56.8 52.5 56.1 51.5 50.4 50.4 55.4 51.6 53.0 57.1 58.3 60.6 59.3 66.3 PMI S, input prices, diff. index Current month … 61.8 59.4 60.4 60.3 56.3 55.3 55.6 61.5 55.9 58.6 58.0 64.5 60.4 57.9 - PMI S, prices charged, diff. index Current month … 52.1 51.3 53.0 54.6 52.5 52.3 52.4 54.2 49.7 53.5 53.1 53.6 54.7 51.7 - *Balanced index is the difference between the shares of those who expect prices to rise and to fall. **Households surveys in Apr-July were conducted by phone, their results are not comparable with those obtained later.

Source: FOM, Rosstat, Bloomberg, IHS Markit, Bank of Russia RUSSIAN MACRO UPDATE 18

ECONOMIC FORECASTS (1) Medium-term outlook for the Russian economy

Key parameters of the Bank of Russia’s forecast scenarios 2020 BASELINE (growth as % of previous year, if not indicated otherwise) (actual/estimate) 2021 2022 2023 Inflation, as % in December year-on-year 4.9 3.7-4.2 4.0 4.0 Inflation, average for the year, as % year-on-year 3.4 4.4-4.8 4.0 4.0 Gross domestic product -3.1 3.0-4.0 2.5-3.5 2.0-3.0 Final consumption expenditure -5.2 4.7-5.7 2.0-3.0 1.8-2.8 – households -8.6 5.0-6.0 2.5-3.5 2.0-3.0 Gross capital formation -4.2 3.9-5.9 3.0-5.0 2.5-4.5 – gross fixed capital formation -6.2 3.2-5.2 2.4-4.4 2.5-4.5 Exports -5.1 1.1-3.1 3.6-5.6 2.2-4.2 Imports -13.7 8.9-10.9 3.4-5.4 2.9-4.9 Money supply in national definition 13.5 10-14 7-11 7-11 Claims on organisations and households in rubles and foreign 10.9 9-13 7-11 7-11 currency* – on organisations 10.2 7-11 6-10 6-10 – on households, including 12.9 14-18 10-14 10-14 mortgage loans 21.2 16-20 14-18 14-18

*Banking sector claims on organisations and households means all of the banking sector’s claims on non-financial and financial institutions and households in rubles, foreign currency and precious metals, including loans issued (including overdue loans), overdue interest on loans, credit institutions’ investment in debt and equity securities and promissory notes, as well as other forms of equity interest in non- financial and financial institutions, and other accounts receivable from settlement operations involving non-financial and financial institutions and households. Claims’ growth rates are given with the exclusion of foreign currency revaluation. In order to exclude the effect of foreign currency revaluation the growth of claims in foreign currency and precious metals is converted to rubles using the period average USDRUB exchange rate Source: Bank of Russia RUSSIAN MACRO UPDATE 19

ECONOMIC FORECASTS (2) Medium-term outlook for the Russian economy Russia’s balance of payments indicators* 2020 BASELINE (billions of US dollars) (estimate) 2021 2022 2023 Current account 33 39 29 25 Balance of trade 89 119 116 119 Exports 330 375 389 406 Imports 240 256 273 287 Balance of services -18 -35 -41 -48 Exports 45 49 53 58 Imports 63 84 94 106 Balance of primary and secondary income -39 -45 -46 -47 Current and capital account balance 32 39 29 25 Financial account (excluding reserve assets) 50 26 12 6 Government and the central bank -2 -9 -8 -9 Private sector 52 35 20 15 Net errors and omissions 4 0 0 0 Change in reserve assets ('+' – increase, '-' – decrease) -14 13 17 19

Urals price, average for the year, US dollars per barrel 42 50 50 50

* Using the methodology of the 6th edition of “Balance of Payments and International Investment Position Manual” (BPM6). In the Financial account “+” stands for net lending, “-” – for net borrowing. Due to rounding total results may differ from the sum of respective values. Source: Bank of Russia RUSSIAN MACRO UPDATE 20

MONETARY POLICY (1) Decision  In the first quarter, the rate of consumer price growth has been higher than the Bank of Russia’s forecast. as of March 19, 2021  Domestic demand is recovering more steadily and faster than expected, outstripping the pace of output growth in a number of sectors. The Bank of Russia  The expectations with regard to external demand are also improving on the back of additional fiscal increased the key rate support measures in certain countries and accelerating vaccination paces of the population. to 4.50% p.a.  Given the current monetary policy stance, annual inflation will return to the Bank of Russia’s target close Signal to 4% in the first half of 2022 and will remain at that level further on. “The Bank of Russia will continue to determine the timeline and pace of a Key rate, % per annum Inflation, % YoY return to neutral monetary 12 policy taking into account actual and expected 10 inflation dynamics relative to the target and economic 8 developments over the 5.67 6 forecast horizon, as well as risks posed by domestic and 4 external conditions and the 4.5 reaction of financial 2 markets. That said, the Bank of Russia holds open the 0 prospect of further increases Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 in the key rate at its upcoming meetings.” Source: Bank of Russia 21

MONETARY POLICY (2) Monetary Policy Guidelines 2021-2023: matrix of macroeconomic forecast scenarios  The key point is the dynamics of potential and demand Demand Sustainable recovery Long and unsustainable recovery Baseline Disinflationary • The weakening of epidemiological risks • The dynamics of potential GDP corresponds to the • Moderate decline in potential GDP trajectory baseline scenario • Slower recovery of demand due to the prolonged nature • Recovery in household consumer activity, comparable to other post-crisis episodes of the pandemic • Sustainable deviation of inflation downwards from the potential • Gradual recovery of investment activity target • Gradual fiscal consolidation in line with the planned return • Longer and more pronounced accommodative monetary Moderate decline of of decline Moderate to the parameters of the fiscal rule in 2022 policy than in the baseline scenario Proinflationary Risk • The potential of the economy is falling significantly more • Possible escalation of geopolitical risks, credit crisis in than in the baseline scenario countries with high debt levels

Supply • Consumer demand is recovering steadily, and investment is • Reduction of the potential is greater than in the baseline recovering more slowly than in the baseline scenario scenario • The economy is returning to its potential (lower than • External shocks create significant pro-inflationary before) in 2021 and even exceeds it somewhat, which pressures in 2021, then inflation falls below target under creates pro-inflationary risks the influence of weak demand. Inflation stabilises close • Inflation returns to the target by Q3 and Q4 of 2022 and to 4% after 2023 remains close to the target further on • Temporary significant tightening of monetary policy with • A temporary shift to a moderately tight monetary policy a return to accommodative policy in the second half of Deep decline of potential of decline Deep with a return to neutral monetary policy by the end of the the forecast period projection period is possible Source: Bank of Russia RUSSIAN MACRO UPDATE 22

INTERNATIONAL RESERVES Foreign exchange and gold assets by asset class As of 30 June 2019 As of 30 June 2020 Change in Assets billions of share of billions of share of Jul 2019-June 2020, US dollars assets, % US dollars assets, % billions of US dollars Government securities of foreign issuers* 206.2 39.9 218.3 38.9 12.1 Deposits and account balances with foreign counterparties 147.5 28.5 138.8 24.7 -8.7 Gold 98.7 19.1 128.5 22.9 29.9 Non-government securities of foreign issuers 36.4 7.0 45.8 8.2 9.4 International organisations securities 15.8 3.1 23.5 4.2 7.7 Reverse repo operations with foreign counterparties 2.6 0.5 3.6 0.6 1.1 Claims in foreign currency on Russian counterparties and issuers** 2.7 0.5 1.4 0.2 -1.3 Net position with the IMF 7.2 1.4 1.0 0.2 -6.2 Claims on foreign counterparties on foreign currency supply -0.1 0.0 0.2 0.0 0.3 Total*** 516.8 100.0 561.1 100.0 44.3 * Securities issued by a foreign government or foreign issuers with explicit government guarantee. ** Claims on Russian credit institutions, Eurobonds of the Russian Federation and other Russian issuers. *** The total value may differ from the sum of asset classes values due to rounding.

Figure 10: Bank of Russia foreign exchange and gold assets by currency* Figure 11: Bank of Russia foreign exchange and gold assets by credit rating, % (% of market value) Euro US dollar Gold Yuan Pounds sterling Others AAA AA A Gold Other* 100% 100% 6.9 7.2 7.2 7.0 6.0 5.9 19.1 80% 13.2 12.2 80% 22.9

60% 19.1 22.9 60% 29.3 34.0 40% 24.2 22.2 40% 26.4 19.9 20% 20% 30.6 29.5 18.1 16.2 0% 0% As of 30 June 2019 As of 30 June 2020 As of 30 June 2019 As of 30 June 2020 * The distribution takes into account unsettled conversion transactions as of 31 December 2018 and 31 December 2019. * Mainly claims on Russian counterparties and issuers and Russia’s net position with the IMF. Source: Bank of Russia 3 FINANCIAL SECTOR OVERVIEW BANK OF RUSSIA: OVERVIEW 24

FINANCIAL MARKET DEVELOPMENT STRATEGY Guidelines for the Development of the Russian Financial Market in 2019 - 2021 The Bank of Russia Guidelines for the Development of the Russian Financial Market in 2019 – 2021 cover the following key areas and activities:

Building reliable Improving financial Developing market Ensuring financial financial inclusion and competitiveness stability environment availability of capital

• Involvement of financial • Introduction of individual • Implementation of integrated • Control for the population consumer ombudsmen in pension capital accounts road map for developing indebtedness and prevention disputes resolution • Introduction of “green” bonds competition in various sectors of excessive risk accumulation • Increase of personal • Crowdfunding of Russian economy approved in the segment by the Government responsibility of management • Introduction of new rules for • Risk-based approach to • Limited employment crediting private-public • Building biometric database insurance market participants opportunities in financial sector partnerships • Credit history bureau reform • Widening the list of financial for malicious (unscrupulous) • Development of concession • Marketplace project launch non-credit institutions subject people projects • Faster payment system in force to stress testing • Development of qualified • Marketplace project launch • Testing of digital identification • Improving the toolkit for investor institute macroprudential stress testing • Introduction of financial platform • Increase of responsibility for services access points map • “Regulatory sandbox” project substandard sale of financial • Development of remote development products identification and unified • Bank of Russia’s withdrawal • Unified financial transactions biometric system from the capital of banks register • Development of electronic undergoing resolution after insurance services distribution their financial rehabilitation channels • Improving insurance services inclusion in Russian regions FINANCIAL SECTOR OVERVIEW 25

BANKING SECTOR: CURRENT AGENDA Shaping a favourable operating environment and supporting market competition

Proportional banking regulation: differentiating regulatory burden for banks based on their size Risk-oriented supervision: aiming to remedy and simplifying requirements for smaller banks problematic situations in banks at an early stage focused on retail and SME lending

New resolution mechanism: reducing financial Development of macroprudential regulation: costs and execution period of the resolution streamlining the regulation, introducing procedure countercyclical approach

New regulations to the credit bureaus: Introduction of PTI ratio in order to regulate the authorising several strategic credit bureaus with consumer lending market more efficiently the function of aggregating information on debt payments

Development of banking supervision: introduction of the Basel Committee on Banking Basel II and III in force: Leverage ratio (except for Supervision (BCBS) standard on capital banks with basic license), NSFR – for Domestic- requirements for banks` equity investment in SIBs funds (since December 16, 2017) FINANCIAL SECTOR OVERVIEW 26

BANKING SECTOR: PROPORTIONAL REGULATION Differentiating regulatory burden for banks depending on their size Regulatory burden depends on license type

• Minimum size of capital (own funds) – RUB 300 mln • Only 5 mandatory requirements, • Minimum size of capital (own funds) including H1.0, H1.2, H3, H6, H25 ratios – RUB 1 bln • Limitations on international operations • May carry out all banking • Simplified disclosure rules - not required operations set forth by the law to disclose information on accepted risks, Systemically important • All mandatory requirements set by their assessment or management the Bank of Russia must be met financial institutions (SIFI) procedures, or any information on are subject to: financial instruments included in the • Must be compliant with all international standards calculation of their own funds (capital) • Higher capital adequacy requirements • Technically complicated international • Financial reporting fully compliant • Advanced risk management approach standards are non applicable with RAS and IFRS

BASIC LICENSE UNIVERSAL LICENSE

On 1 June 2017, Federal Law No. 92-FZ dated 1 May 2017 came into force. It envisages the introduction of proportional regulation designed to set up a regulatory balance for banks differing in scale and in the nature of operations. 123 banks hold basic license, as of 1 November 2020. FINANCIAL SECTOR OVERVIEW 27

BANKING SECTOR: NEW RESOLUTION MECHANISM* The bank resolution mechanism implemented in 2017 is designed to reduce both costs and time while enhancing control over resolution processes Update on current status In 2017 the Bank of Russia adopted a new resolution mechanism, involving • Bank FC Otkritie the CBR’s direct participation in the capital of the banks under resolution. Over Bank of Russia is developing a strategy 2017-2019, measures were taken to rehabilitate three major systemically for exiting the capital of important financial groups: Promsvyazbank, Otkritie, B&N Bank, and two the Otkritie group with the help from regionally important banks: Moscow Industrial Bank and Asian-Pacific Bank. investment consultants and is looking for investors who would buy the group’s shares. Resolution measures have been applied to Promsvyazbank PJSC, Public Joint- Recapitalization: RUB 556 bln Stock Company “Bank Otkritie Financial Corporation“, B&N Bank and PJSC Deposit Balance: RUB 0 Asian-Pacific Bank, which established permanent administration bodies, and • now these banks are supervised by the Bank of Russia under the general mode. Asian-Pacific Bank Bank of Russia is looking for investors who would buy the Asian-Pacific Bank group’s shares. Deposit Insurance Agency acquired over 99.99% of Promsvyazbank PJSC’s shares, Recapitalization: RUB 9 bln and then transferred them to the Russian government. Deposit Balance: RUB 0

• NB Trust bank Public Joint-Stock Company "Bank Otkritie Financial Corporation“ and B&N Bank Non-Core Asset Bank’s work with bad became a basis for a universal financial group. and non-core assets is planned to be completed in 2023. There are no plans to sell the bank afterwards. NB TRUST, Bank AVB and “Rost Bank” (JSC) provided a basis for the Non-Core Asset Bank, which received the non-core and bad assets of the banks under Recapitalization: RUB 1 bln resolution. Deposit Balance: RUB 1,668 bln

*A new bank resolution mechanism involving the Bank of Russia has been implemented since 2017. Besides, since 2008, the “credit” mechanism of bank resolution with DIA’s participation has also been in use. Under the latter mechanism, DIA engages an investor and afterwards may provide the bank with financial assistance at a preferential rate; such loans are funded by the Bank of Russia. FINANCIAL SECTOR OVERVIEW 28

BANKING SECTOR: KEY FIGURES Active supervision and tighter regulation allowed to strengthen the health of the banking sector Figure 12: In 2013-2020 more than 450 licenses were revoked causing Figure 13: Banking sector profitability restored almost no impact on the banking sector’s total assets

Number of credit institutions, lhs Banking sector assets, RUB tn, rhs^ Net Income, bln RUB 1,200 105.3 112 2,100 978 1,000 96 1,800 1,608 800 80 1,500 1,200 600 64 406 900 805 400 39.1 48 600 200 32 300 205 0 16 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1m2021 2013 2014 2015 2016 2017 2018 2019 2020 1m2021 *366 banks and 40 non-banking credit organisations Figure 14: Loans and deposits volume (RUB tn) and growth rates Figure 15: Banks hold an acceptable level of capital under Basel III

Corporate and retail deposits, lhs Corporate and retail loans*, lhs Capital adequacy ratio, N1.0, % Deposits YoY growth**, % rhs Loans YoY growth**, % rhs 14.6* 14.6* 14.6* 15.0 15 14.4* 14.2* 15 14 14 60 12.2 11.5 9.6 10.0 13 13 50 46.3 66.9 12 12 13.7 5.0 11 13.5 13.1 11 40 65.3 12.5 12.7 12.4 12.5 12.5 2.2 45.6 12.1 12.2 10 10 30 0.0 9 9

2012 2013 2014 2015 2016 2017 2018 2019 2020 1m2021

12.15 03.16 06.16 09.16 12.16 03.17 06.17 09.17 12.17 03.18 06.18 09.18 12.18 03.19 06.19 09.19 12.19 03.20 06.20 09.20 12.20 01.21 *Excluding credit institutions under financial rehabilitation procedure ^Since 01.11.2020 assets are shown net of created provisions. Data for retrospective periods restated. *Since 01.01.2020 corporate loans include loans to financial and non-financial organizations (excl. credit organizations). Data for retrospective periods restated **YoY, ccy adj. by credit institutions operating as of the reporting date. Since 01.01.2020 annual growth rate is based on chain method. Data for retrospective periods restated Source: Bank of Russia FINANCIAL SECTOR OVERVIEW 29

BANKING SECTOR: FUNDING The funding of the banking sector mostly comes from corporate and retail deposits Figure 16: In January 2021 corporate deposits grew by 16.8% YoY to Figure 17: In January 2021 retail deposits amounted to RUB 32.2 tn, RUB 33.2 tn growth slowed down to 3.1% YoY Corporate deposits, RUB tn, lhs Retail deposits, RUB tn, lhs YoY (ccy adj., by credit institutions operating as of the reporting date), rhs YoY (ccy adj., by credit institutions operating as of the reporting date), rhs 19.0% 20% 20% 33.2 32.2 33 16.8% 33 15% 10% 28 28 10% 23.16.0% 23.2 0% 23 23 3.1% 5%

-10% 18 18 0%

01.21

12.15 03.16 06.16 09.16 12.16 03.17 06.17 09.17 12.17 03.18 06.18 09.18 12.18 03.19 06.19 09.19 12.19 03.20 06.20 09.20 12.20

01.21

12.15 03.16 06.16 09.16 12.16 03.17 06.17 09.17 12.17 03.18 06.18 09.18 12.18 03.19 06.19 09.19 12.19 03.20 06.20 09.20 12.20 *Since 01.01.2020 annual growth rate is based on chain method. Data for retrospective periods restated. *Since 01.01.2020 annual growth rate is based on chain method. Data for retrospective periods restated. Retail deposits are shown net of escrow accounts, data for restrospective periods restated Figure 18: Operations with the Bank of Russia, tn RUB Figure 19: Sources of funding, % of total liabilities

Borrowings from the Bank of Russia (with minus sign) Retail deposits Corporate deposits Claims to the Bank of Russia * Central bank funding Other sources Share of loans from the Bank of Russia in total liabilities, % Net claims to the Bank of Russia, rhs 8.5 6.5 4.5 23.8% 2.5 30.6% 0.5 0.3 34.0% 34.0% -1.5 -3.5 -5.5 -2.9 12.0% 30.2%

3.9%

01.21

03.16 06.16 09.16 12.16 03.17 06.17 09.17 12.17 03.18 06.18 09.18 12.18 03.19 06.19 09.19 12.19 03.20 06.20 09.20 12.20 12.15 31.5%

*excluding Mandatory cash balances by credit organizations with the Bank of Russia 1.01.2015 1.02.2021 Source: Bank of Russia FINANCIAL SECTOR OVERVIEW 30

BANKING SECTOR: LENDING The growth pace of retail loans has started to moderate Figure 20: Corporate lending increased 10.7% YoY in January 2021 Figure 21: Retail lending growth was stable at 13.5% YoY in January 2021 Corporate loans*, RUB tn, lhs Retail loans, RUB tn, lhs YoY (ccy adj., by credit institutions operating as of the reporting date), rhs YoY (ccy adj., by credit institutions operating as of the reporting date), rhs 46.4 30% 20.5 25% 46.0 20.0 20% 43.5 20% 18.5 41.0 10.7% 15% 35.0 10% 17.0 38.5 13.5% 10% 36.0 0% 15.5 5.1% 10.7 5% 33.5 -10% 14.0 31.0 12.5 -5.6% 0% 28.5 -20% 11.0 -5%

26.0 -30% 9.5 -10%

01.21

12.15 03.16 06.16 09.16 12.16 03.17 06.17 09.17 12.17 03.18 06.18 09.18 12.18 03.19 06.19 09.19 12.19 03.20 06.20 09.20 12.20

01.21

12.15 03.16 06.16 09.16 12.16 03.17 06.17 09.17 12.17 03.18 06.18 09.18 12.18 03.19 06.19 09.19 12.19 03.20 06.20 09.20 12.20 *Since 01.01.2020 corporate loans include loans to financial and non-financial organizations (excl. credit organizations). Data for retrospective periods restated *Since 01.01.2020 annual growth rate is based on chain method. Data for retrospective periods restated Figure 22: Share of bad corporate loans** slightly decreased to 9.8% as Figure 23: Due to COVID-19 pandemic retail loans quality demonstrates of January 2021, while the bad loan loss reserves to bad loans ratio slight decrease: the share of bad loans** reached 7.4% in January 2021 accounted for 75% Share of bad loans, lhs Bad loan loss reserves to bad loans ratio, rhs 75% Share of bad loans, lhs Bad loan loss reserves to bad loans ratio, rhs 14% 80% 14% 12.9% 90% 64% 88% 12% 12% 9.8% 60% 88% 9.1% 10% 10% 86% 8% 40% 8% 7.4% 6% 83% 84% 20% 6% 4% 4% 82%

2% 0% 2% 80%

12.15 03.16 06.16 09.16 12.16 03.17 06.17 09.17 12.17 03.18 06.18 09.18 12.18 03.19 06.19 09.19 12.19 03.20 06.20 09.20 12.20

01.21

01.21

12.15 03.16 06.16 09.16 12.16 03.17 06.17 09.17 12.17 03.18 06.18 09.18 12.18 03.19 06.19 09.19 12.19 03.20 06.20 09.20 12.20 ** Loans classified into quality category of IV and V according to the requirements of Regulation No.590-P. Quality category IV – high credit risk (probability of financial losses due to non-performance or improper performance of obligations by the borrower requires its depreciation by 51 to 100 per cent); Quality category V – no possibility of loan repayment due to the borrower’s inability or refusal to meet loan commitments, which requires complete (100 per cent) depreciation of the loan. Source: Bank of Russia FINANCIAL SECTOR OVERVIEW 31

BANKING SECTOR: MORTGAGE SEGMENT Mortgage loans have been the key driver of credit expansion in 2020 Figure 24: Mortgage lending growth increased 21.2% YoY in January Figure 25: Share of NPLs remains at historically low levels 2021 Mortgage loans, RUB tn, lhs Mortgage loans NPL ratio, lhs NPLs loss reserves to NPLs ratio, rhs

10 9.4 30% 4.0% 110% 9 25% 3.5% 101% 105% 3.0% 8 21.2% 100% 7 20% 3.0% 91% 11.7% 95% 6 15% 2.5% 90% 5 10% 4 4.1 2.0% 85% 5% 3 1.5% 1.3% 80%

2 0% 1.0% 75%

01.21

12.15 03.16 06.16 09.16 12.16 03.17 06.17 09.17 12.17 03.18 06.18 09.18 12.18 03.19 06.19 09.19 12.19 03.20 06.20 09.20 12.20

01.21

12.15 03.16 06.16 09.16 12.16 03.17 06.17 09.17 12.17 03.18 06.18 09.18 12.18 03.19 06.19 09.19 12.19 03.20 06.20 09.20 12.20 *Since 01.01.2020 annual growth rate is based on chain method. Data for retrospective periods restated. Figure 26: Distribution of mortgage loans by LTV Figure 27: Risk weight add-ons applied to RUB mortgage loans depending on the LTV and the PTI (applied from 1 April 2020) 42% 3Q2019 4Q2019 1Q2020 2Q2020 3Q2020 35% 31.7% PTI interval, % 28.4% 28% PTI not 0-30 30-40 40-50 50-60 60-70 70-80 80+ calculated 21% 80-85 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.5 14% 12.2% 8.8% 7.1% 85-90 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 7% 3.7% 3.5% LTV 1.8% 0.5% 2.0 for the whole term 90+ 0% (excl. loans repaid with the use of the maternity capital) < 10 % 10-20% 20-30% 30-40% 40-50% 50-60% 60-70% 70-80% 80-90% LTV interval *Risk weight add-ons applied from 1 April 2020 to mortgage loans issued from 1 April 2020 Source: Bank of Russia FINANCIAL SECTOR OVERVIEW 32

BANKING SECTOR: UNSECURED CONSUMER LENDING Unsecured lending market growth rate has somewhat moderated following new macroprudential regulations Figure 28: Unsecured consumer lending growth decreased to 8.6% YoY Figure 29: Distribution of unsecured consumer loan issuance by in January 2021 payment to income ratio (under CBR Ordinance No. 4892-U), % Unsecured consumer loans, RUB tn, lhs YoY (by credit institutions operating as of the reporting date), rhs

10.5 9.8 28% 10.0 22% 9.5 35% 9.0 16% 32.3% 8.5 8.0 8.6% 10% 7.5 4% 7.0 30% 6.5 -11.9% -2% 6.0 5.6 5.5 -8%

5.0 -14% 25%

01.21

03.16 06.16 09.16 12.16 03.17 06.17 09.17 12.17 03.18 06.18 09.18 12.18 03.19 06.19 09.19 12.19 03.20 06.20 09.20 12.20 12.15 20% 18.0% *Since 01.01.2020 annual growth rate is based on chain method. Data for retrospective periods restated. Figure 30: Share of NPLs amounted to 9.0% as of January 2021 15% NPL ratio, lhs NPLs loss reserves to NPLs ratio, rhs 11.3% 10.3% 11.0% 96% 9.1% 19% 10% 8.1% 16.9% 94% 17% 93% 92% 15% 5% 90% 13% 88% 11% 88% 9.0% 0% 9% 86% 0-30 30-40 40-50 50-60 60-70 70-80 80+ 7% 84%

Q3 2020 Q4 2020

01.21

12.15 03.16 06.16 09.16 12.16 03.17 06.17 09.17 12.17 03.18 06.18 09.18 12.18 03.19 06.19 09.19 12.19 03.20 06.20 09.20 12.20

Source: Bank of Russia FINANCIAL SECTOR OVERVIEW 33

BANKING SECTOR: INTRODUCTION OF PTI The Bank of Russia introduces a payment to income ratio for regulatory purposes

Effective from 1 September 2020, the Bank of Russia reduced add-ons to the risk coefficients depending on the payment to income ratio (PTI) and the effective interest rate (EIR).

PTI interval, % Values of add-ons to the risk coefficients applied to unsecured consumer loans 0-30 30-40 40-50 50-60 60-70 70-80 80+ subject to calculation of PTI 0-10 0 0 0 0.1 0.3 0.5 0.8 Higher level of add-ons are applied to loans

% 10-15 0 0 0 0.2 0.4 0.6 0.9 with PTI exceeding 50%.

15-20 0.2 0.2 0.2 0.6 0.9 1.0 1.3 Banks calculate PTI in accordance with 20-25 0.5 0.5 0.5 1.0 1.3 1.4 1.7 Appendix 1 to Bank of Russia Ordinance No. 4892-U when making a decision on

EIR interval, interval, EIR 25-30 0.9 0.9 0.9 1.4 1.6 1.8 2.0 granting a loan in the amount (total credit amount) of ₽10,000 or more or an increase 30-35 2.0 2.0 2.0 2.1 2.2 2.3 2.5 in the total credit amount on a bank card. 35+ 5.0 5.0 5.0 5.0 5.0 5.0 5.0

Values of add-ons to the risk coefficients EIR interval, % 0-10 10-15 15-20 20-25 25-30 30-35 35+ applied to unsecured consumer loans Value of add-ons 0.1 0.2 0.6 1.0 1.4 2.1 5.0 for which PTI calculation is not obligatory

Risk-weight add-ons reduced since 1 September 2020 Source: Bank of Russia FINANCIAL SECTOR OVERVIEW 34

BANKING SECTOR: INTEREST RATES Interest rates trending down again after a temporary pickup over 2019

Figure 31: Weighted average long-term interest Figure 32: Weighted average long-term Figure 33: Max interest rate on retail rates on loans in rubles, %* interest rates on deposits in rubles, %* deposits in rubles of top-10 banks and Bank of Russia’s policy rate, % Corporate loan rates Retail loan rates Corporate deposit rates Retail deposit rates Key rate Max retail deposit rate of top-10 banks 16 18 26 14 16 22 14 12 18 12 10

14 10 8 10.6 8 10 6 7.0 4.6 6 4.5 6 4 4.2 4 4.25

2 2 2

02.14 07.14 12.14 05.15 10.15 03.16 08.16 01.17 06.17 11.17 04.18 09.18 02.19 07.19 12.19 05.20 10.20

01.21

01.21

02.14 07.14 12.14 05.15 10.15 03.16 08.16 01.17 06.17 11.17 04.18 09.18 02.19 07.19 12.19 05.20 10.20

01.21

02.14 06.14 10.14 02.15 06.15 10.15 02.16 06.16 10.16 02.17 06.17 10.17 02.18 06.18 10.18 02.19 06.19 10.19 02.20 06.20 10.20

*with maturities of over 1 year Source: Bank of Russia FINANCIAL SECTOR OVERVIEW 35

BANKING SECTOR: DEDOLLARISATION Dollarization of the banking sector has notably reduced over the last years Figure 34: Corporate FX lending declined significantly over the past few Figure 35: Retail FX loan portfolio is insignificant in size years Corporate loans*, USD bn, lhs Share of FX loans in total amount of loans, rhs Retail loans, USD bn, lhs Share of FX loans in total amount of loans, rhs 188.1 190 39.2% 41% 3.0% 180 38% 4.0 2.5% 170 162.7 36% 2.0% 160 33% 3.0 1.5% 150 31% 140 28% 1.0% 26.7% 2.0 0.5% 130 26% 1.3 0.5%

120 23% 1.0 0.0%

01.21

12.15 03.16 06.16 09.16 12.16 03.17 06.17 09.17 12.17 03.18 06.18 09.18 12.18 03.19 06.19 09.19 12.19 03.20 06.20 09.20 12.20

01.21

12.15 03.16 06.16 09.16 12.16 03.17 06.17 09.17 12.17 03.18 06.18 09.18 12.18 03.19 06.19 09.19 12.19 03.20 06.20 09.20 12.20 *Since 01.01.2020 corporate loans include loans to financial and non-financial organizations (excl. credit organizations). Data for retrospective periods restated. Figure 36: Due to ruble depreciation the share of corporate and retail FX Figure 37: Risk weights applied to FX assets, % deposits in total amount of deposits has risen vs. YE 2019 Reserve requirements end 2015 May 1, 2016 July 1, 2018 Share of FX deposits in total corporate deposits, lhs Retail Corporate 8% 8% Share of FX deposits in total retail deposits, rhs 150% 150% 48.9% +1 +1 160 July 1, 2019 130% August 1, 2018 +1 40% 50% +2.75 140 +20 August 1, 2016 +1.75 45% 35% 110% 120 +20 +50 40% end 2015 4.25 4.25 +30 30% 100 +10 +10 35% 29.4% 35.9% 25% 80 30% 100 100 100 100 25% 21.7% 20% 60 20% 15% 40 FX loans to Other corporate Commercial FX Securities of non-

exporters FX loans mortgages resident

12.15 03.16 06.16 09.16 12.16 03.17 06.17 09.17 12.17 03.18 06.18 09.18 12.18 03.19 06.19 09.19 12.19 03.20 06.20 09.20 12.20 01.21 companies Source: Bank of Russia FINANCIAL SECTOR OVERVIEW 36

BANKING SECTOR: CAPITAL ADEQUACY High quality capital base and solid capital adequacy levels under Basel III standards

Figure 38: Capital adequacy ratio for the banking sector remains Figure 39: Credit organizations with capital exceeding RUB 25 bln stable (12.3% on 1.01.20 and 12.5% 1.02.21) have lower buffer vs N1.0 minimum requirement due to the economies of scale

18 13,000 55

12,000 50 16 11,423 11,000 45 14 41.9 9,009 12.510,000 40 12 12.7 9,000 9.6 35 10 8,000 8.5 30 % 25.7 8 8.7 7,000 RUB bn % 8.2 25 21.9 6,000 21.6 6 20 5,000 16.1 15.9 13.9 12.5 4 15 13.8 4,000

2 3,000 10

0 2,000 5 less than 300 - 1 1-10 bln 10 - 25 25 - 50 50 - 100 100 - more

300 mln bln rub rub bln rub bln rub bln rub 250 bln than 250

12.15 04.16 08.16 12.16 04.17 08.17 12.17 04.18 08.18 12.18 04.19 08.19 12.19 04.20 08.20 12.20 rub rub bln rub Ratio of own funds (capital) to risk-weighted assets (Basel III N1.0 ratio) Tier I capital ratio (N1.2) Capital adequacy ratio N1.0 (by capital size) Common equity Tier I capital ratio (N1.1) Capital adequacy ratio N1.0 as of 01.02.2021 (12.5%) Own funds (Basel III capital), RUB bn, rhs

Source: Bank of Russia FINANCIAL SECTOR OVERVIEW 37

BANKING SECTOR: SYSTEMICALLY IMPORTANT FINANCIAL INSTITUTIONS The Bank of Russia has approved the list of SIFI and buffers for capital adequacy ratios

List of systemically important financial institutions Capital adequacy requirements

№ Company name Assets, RUB tn Minimum Bank of Russia requirements for capital adequacy ratios 1 Sberbank 34.9 Common equity Tier 1 capital ratio 2 VTB Bank 17.2 (N1.1) 4.50% 3 Gazprombank 7.4 Tier 1 capital (N1.2) 6.00% Total capital adequacy ratio (N1.0) 8.00% 4 Alfa-Bank 4.5 5 Russian Agricultural Bank 4.0 Values of capital buffers 2017 2018 2019 2020 6 Credit Bank of Moscow 3.0 Capital conservation buffer 1.25% 1.875% 2.25% 2.50%* 7 Bank FC Otkritie 2.8 SIFI buffer 0.35% 0.65% 0.65% 1.0% 8 Sovcombank 1.5 Countercyclical buffer 0% 0% 0% 0% 9 Promsvyazbank n/a Minimum capital adequacy ratios for 10 Rosbank 1.4 SIFI 2017 2018 2019 2020 11 Raiffeisenbank 1.4 N1.1 6.1% 7.0% 7.65% 8.0% 12 UniCredit Bank 1.4 N1.2 7.6% 8.5% 9.15% 9.5% N1.0 9.6% 10.5% 11.15% 11.5% Assets as of February 2021

Systemically important financial institutions account for 75% of total *Capital conservation buffer was raised in accordance with the schedule assets of the Russian banking sector approved by the Bank of Russia throughout 2019 – it wat set at 1.875% from 1 January 2019, 2.0% from 1 April 2019, 2.125% from 1 July 2019, 2.25% from 1 October 2019, and 2.5% from 1 January 2020. FINANCIAL SECTOR OVERVIEW 38

MICROFINANCE Microfinance is a vital part of financial system complementing banks to provide better financial inclusion

Microfinance institutions (MFIs) provide financial services for customers MFIs with no access to banking products, service regions with an insufficient bank presence, offer financial products missing from bank product lines, boost financial literacy and help clients build their credit histories.  Microfinance organizations (MFOs) CBR keeps a state register of MFIs and supervises MFIs directly and via SROs. Currently there are about 7,300 MFI companies.  Consumer credit cooperatives  Credit Housing communities 24% of the entire MFO microloan portfolio are microloans to small to medium enterprises (bearing 5-10% interest rate thanks to state support  Pawnbrokers via MFOs).  Agricultural credit Payday Loans, i.e. small, short-term unsecured loans (up to RUB 30k for cooperatives 30 days) at high rates, are not a development priority and account for 23% of the entire MFO microloan portfolio.

Starting from 1 October 2019, microfinance organisations have to calculate the PTI ratio when taking a decision on extending loan of ₽10,000 or more. For the loans with PTI of the borrower in excess of 50%, the level of add-on to the risk coefficients is set at 50% (65% starting from 1 January 2020). FINANCIAL SECTOR OVERVIEW 39

FINANCIAL STABILITY Macroprudential policy aimed at identifying and preventing potential systemic risks Decision Lending activity and credit risks as of March 19, 2021 The growth rate of bank lending to the economy remains high. Nonetheless, lending growth is uneven across segments. The increase in lending to non-financial organisations is steady, while retail lending growth is accelerating, primarily owing to mortgage loans. “The Bank of Russia Board of The corporate loan portfolio expanded by 9.9%1 in 2020, which is nearly two times more than in 2019 (5.8%). Directors has decided to retain Lending continued to grow in 2021, with the annual increase in the portfolio of outstanding corporate loans the countercyclical capital reaching 11.4% as of 1 March 2021. buffer rate for Russian credit The segment of unsecured consumer lending continues to recover after the decline in the first months of the institutions at zero per cent of pandemic. The annual growth of outstanding loans equalled 8.6%2 as of 1 February 2021. Overall, banks maintain risk-weighted assets …” their lending standards. Households’ average debt burden on newly issued unsecured consumer loans totalled 62%3 in 2020 Q4 (vs 61% in 2020 Q3). The slight rise in the average debt burden per borrower in 2020 Q4 involves “…As the temporary easing no threat to financial stability and was because individual banks returned to lending standards they had applied enabling banks to postpone before the outbreak of the pandemic. loss provisioning for The annual growth of outstanding loans in the housing mortgage segment remains high, with the rise in ruble- restructured loans is gradually denominated mortgage loans reaching 22% as of 1 February 2021.4 The expansion of the mortgage loan portfolio is terminated, in 2021 Q2 largely driven by lending in the primary housing market. the Bank of Russia will consider the issue regarding the release Measures to support consumers and business amid the coronavirus infection outbreak of the accumulated The measures supporting households and businesses continue to be effective; therefore, it is unreasonable to macroprudential buffer for change the national countercyclical buffer and risk-weight add-ons. unsecured consumer loans, Capital adequacy given the level of potential The banking sector has a considerable safety cushion in the form of the accumulated capital buffer of 5.8 trillion losses on such loans.” rubles,5 as well as the macroprudential capital buffer amounting to 0.6 trillion rubles which may only be released based on the relevant decision of the Bank of Russia.

1 According to Reporting Form 0409101. Adjusted for currency revaluation. 2 According to Section 3 of Reporting Form 0409115. For credit institutions operating as of the last reporting date, including previously reorganized banks. 3 According to Reporting Form 0409704. 4 According to Reporting Forms 0409316 and 0420863 including information on securitised mortgage loans, net of acquired claims. 5 According to Reporting Form 0409135. Calculated as of 1 February 2021 as the minimum buffer to absorb losses estimated based on three ratios, taking into account the unaudited profit reclassified to common equity Tier 1 capital and the positive effect of loss on risk-weighted assets. FINANCIAL SECTOR OVERVIEW 40

SECURITIES MARKET (1) Russia’s financial market has been aligned with best international practices

Crisis-proven market infrastructure Simplified market access • the Moscow Exchange has built a secure • Euroclear and Clearstream settlement for equities and and reliable infrastructure ensuring uninterrupted bonds trading • Unified collateral pool for equities, bonds and FX • Trading rules do not stipulate any trading suspensions, markets reduction in trading hours, short sell bans or other • International clearing system membership; Direct restrictions • T+2 settlement on equities, T+1 on OFZs, T+0 on access to FX trading for large corporates corporate bonds • Local investor base development (individual Upgraded corporate governance investment account system, tax incentives, etc.) • Updates to the Listing Rules have created a • High level of competition in the Russian financial Sustainability Sector for financing ESS projects market helps keep the cost of brokerage and • Creation of a two-tier Quotation List within the stock depository services low exchange listing • Financial intermediaries are allowed to make both • Strong criteria for inclusion in the top-tier Quotation brokerage and depository operations list Increased transparency • Streamlined dividend rules for SOEs • Corporate standards aligned with best international • Moscow Exchange instruments comply with the post- practices trade transparency requirements under MiFID II/MiFIR Regulatory changes to promote investments • Mandatory audited IFRS for all public companies • Capital gains on securities held for more than 3 years • Strengthened regulation to prevent market are tax-exempt manipulation and insider trading • Tax deductions for Individual Investment Accounts • Improved disclosure practices (IIA) type A – max RUB 52 000; for IIA type B – at the • Requirement to have a written description of dividend rate of investment income; policy for the top-tier Quotation list • Corporate bonds with yield of under the key rate + • Development of basic standards for professional 5pp became tax-exempt on January 1, 2018 market participants activities FINANCIAL SECTOR OVERVIEW 41

SECURITIES MARKET (2) Growing a deeper Russian bond market with strong potential Figure 40 : Volume of the Russian local bond market, RUB tn Figure 41: Volume of the Russian corporate bond market, RUB tn OFZ Corporate Bonds RUB bonds Eurobonds 24 21.5 32 30.0 20.0 20 19.1 19.5 28 18.2 17.7 CAGR CAGR 5.2 22.9 16.0 6.4 24 16 7.6 +18% 19.8 16.3 +13% 7.6 20 18.3 8.0 8.0 12 11.1 6.7 16 13.1 14.7 13.6 11.3 11.9 8.7 12 11.1 8 7.1 5.2 16.3 9.2 9.2 6.2 6.7 7.8 8.1 5.4 4.2 11.9 13.6 8 4.7 5.9 6.6 3.5 10.2 9.7 11.5 4.3 5.3 13.7 4 2.5 3.0 9.3 3.0 3.6 9.3 5.9 4 2.5 5.5 7.2 7.9 4.5 2.9 3.1 3.5 3.9 4.7 5.0 2.9 3.2 3.6 0 2.2 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Figure 42: “Bondization” of the Russian financial market Figure 43: Corporate loans vs corporate bonds in Russia, RUB tn

Equity market trading volume, RUB tn Loans (incl. foreign debt) Corporate bonds (incl.eurobonds) Bond market trading volume*, RUB tn 78.0 30 80 26.2 23.9 67.6 68.0 67.5 25 22.4 70 21.2 30% 60 29% 29% 20 16.5 27% 15.3 50 15 13.2 12.4 41.3 10.6 11.2 40 8.7 10.3 9.4 9.2 10.8 29.2 21% 10 9.3 30 73% 71% 71% 70% 19% 5 79% 20 81% 0 10 2013 2014 2015 2016 2017 2018 2019 2020 2009 2012 2015 2018 2019 2020 *excl. overnight bonds Source: Moscow Exchange, Cbonds FINANCIAL SECTOR OVERVIEW 42

SECURITIES MARKET (3) Russian OFZ market provides relatively high yields amid investment grade reliability Figure 44: Russian OFZ market volume keeps growing Figure 45: Zero-coupon OFZ yield curve, % OFZ outstanding market volume, RUB tn, lhs Share of non-residents holdings, %, rhs 13.70 March-19 February - 20 March-20 14.0 40 Oct-20 Mar-21 13.0 35 10 12.0 8.75 30 9 11.0 33.1 8.20 23.4 8 7.43 10.0 25 7.38 9.0 20 7 6.17 6.94 8.0 6.80 6.74 15 6 7.0 5.24 6.0 10 54.65

21 4 4.09

3m 6m 9m 1 2 3 5 7 10 15 20 30

1.01.18 1.03.18 1.05.18 1.07.18 1.09.18 1.11.18 1.01.19 1.03.19 1.05.19 1.07.19 1.09.19 1.11.19 1.01.20 1.03.20 1.05.20 1.07.20 1.09.20 1.11.20 1.01.21 1.02. Years to maturity Figure 46: Bond market yields, key rate and RUONIA (% RUB) Figure 47: EM 10Y bond yields (% USD) on the background of credit ratings

20 Cbonds-GBI RU 5Y YTM eff Russia’s sovereign ratings Argentina 18 20.0 Fitch: BBB (stable), as of 5 Feb 2021 RUONIA Index S&P: BBB- (stable), as of 15 Jan 2021 16 17.0 Moody’s: Baa3 (stable), as of 08 Feb 2019 14 CBR Key Rate 14.0 12 11.0 10 Turkey 8 8.0 Mexico SoA 6 5.0 Peru Russia Indonesia Malaysia China Korea 4 2.0 Brazil Kazakhstan Hungary Poland Chile 2 -1.0 Philippines

21 0SD B+ BB2 - BB BB4 + BBB- 6 BBB BBB+ 8 A- A+10 AA- AA12

02.

12.14 03.15 06.15 09.15 12.15 03.16 06.16 09.16 12.16 03.17 06.17 09.17 12.17 03.18 06.18 09.18 12.18 03.19 06.19 09.19 12.19 03.20 06.20 09.20 12.20 Source: Bank of Russia, Cbonds, Bloomberg FINANCIAL SECTOR OVERVIEW 43

SECURITIES MARKET (4) Demand for OFZs placements remains sustainably high Figure 48: OFZ placement dynamics in 2018 - 2021 (RUB bn)

Foreign financial institution subsidiaries Non-residents Non-credit financial institutions Other banks Systemically-important credit institutions 450

400

350

300

250

200

150

100

50

0

10.01.2018 24.01.2018 07.02.2018 21.02.2018 07.03.2018 21.03.2018 04.04.2018 25.04.2018 23.05.2018 06.06.2018 20.06.2018 04.07.2018 18.07.2018 01.08.2018 15.08.2018 03.10.2018 17.10.2018 31.10.2018 14.11.2018 28.11.2018 12.12.2018 26.12.2018 16.01.2019 30.01.2019 13.02.2019 27.02.2019 13.03.2019 27.03.2019 10.04.2019 24.04.2019 15.05.2019 29.05.2019 19.06.2019 03.07.2019 17.07.2019 31.07.2019 14.08.2019 28.08.2019 11.09.2019 25.09.2019 09.10.2019 23.10.2019 06.11.2019 20.11.2019 04.12.2019 18.12.2019 22.01.2020 05.02.2020 19.02.2020 08.04.2020 22.04.2020 13.05.2020 27.05.2020 10.06.2020 23.06.2020 08.07.2020 22.07.2020 05.08.2020 02.09.2020 16.09.2020 30.09.2020 14.10.2020 28.10.2020 11.11.2020 25.11.2020 09.12.2020 23.12.2020 20.01.2021 02.02.2021 17.02.2021 10.03.2021

Source: Bank of Russia, Ministry of Finance, National Settlement Depository FINANCIAL SECTOR OVERVIEW 44

SECURITIES MARKET (5) Russian equity market: key trends Figure 49: Russian Equity market cap, bln RUB & bln USD Figure 50: Market capitalization to GDP ratio, %

Market cap, bln USD, rhs Market cap, bln RUB, lhs 2018 2019 1200 48,000 200 174.9 1000 43,000 160 148.0 800 38,000 121.8 120 90.5 600 33,000 80 59.4 59.0 400 28,000 46.6 603 40 200 367 23,000 0 18,000 0

20 US UK Japan Korea China Euro area Russia

11.

01.16 04.16 07.16 10.16 01.17 04.17 07.17 10.17 01.18 04.18 07.18 10.18 01.19 04.19 07.19 10.19 01.20 04.20 07.20 10.20

Figure 51: Russian equities market trading volumes proves stable Figure 52: Dividend yield (12M): Russia vs. EM, %

Trading volumes, RUB tn, lhs MOEX Index, rhs Russia Emerging markets 6.7 7.0 3,400 11 6.0 3290 3,100 10 9 5.0 2,800 8 2,500 7 5.84 4.0 6 2,200 3.0 2.5 5 1,900 4 2.98 2.0 1664 1,600 3 2 3.02

1.0 1,300 1 2.24

03.15 06.15 09.15 12.15 03.16 06.16 09.16 12.16 03.17 06.17 09.17 12.17 03.18 06.18 09.18 12.18 03.19 06.19 09.19 12.19 03.20 06.20 09.20 12.20

12.15 02.16 04.16 06.16 08.16 10.16 12.16 02.17 04.17 06.17 08.17 10.17 12.17 02.18 04.18 06.18 08.18 10.18 12.18 02.19 04.19 06.19 08.19 10.19 12.19 02.20 04.20 06.20 08.20 10.20 12.20

Source: Bloomberg, Moscow Exchange, International Monetary Fund and World Federation of Exchanges FINANCIAL SECTOR OVERVIEW 45

SECURITIES MARKET (6) Russian equity market performance vs EM peers

Figure 53: Russian MSCI index vs EM peers (01.01.15 = 100%) Figure 54: Forward P/E ratio (12m), MSCI Russia vs MSCI EM

Russia India Brazil MSCI Russia, lhs MSCI EM, lhs Russia to EM P/E discount, rhs China South Africa EMEA Turkey 220% 20 -20% 19.71 200% 18 -25%

180% 16 -30% 160% 14 -35% -36% 140% 12 -40% 120% 12.85 10 -45% 100% 8 -50% 80% 6 -55% 60%

40% 4 -60%

20% 2 -65%

20

20

31.12.

31.01.15 30.04.15 31.07.15 31.10.15 31.01.16 30.04.16 31.07.16 31.10.16 31.01.17 30.04.17 31.07.17 31.10.17 31.01.18 30.04.18 31.07.18 31.10.18 31.01.19 30.04.19 31.07.19 31.10.19 31.01.20 30.04.20 31.07.20 31.10.20

31.12.

30.01.15 30.05.15 30.09.15 31.01.16 31.05.16 30.09.16 31.01.17 31.05.17 30.09.17 31.01.18 31.05.18 30.09.18 31.01.19 31.05.19 30.09.19 31.01.20 31.05.20 30.09.20

Source: Bloomberg FINANCIAL SECTOR OVERVIEW 46 CORPORATE GOVERNANCE New corporate governance standards reflect best international practices Corporate governance Corporate actions reform  Guidance for members of financial institutions’ Boards of Directors Amendments to the JSC Law :  Recommendations on organizing and conducting self-assessment of the  Protection against dilution of stakes in the authorized capital of JSCs Boards of Directors’ performance in public JSCs and violation of dividend rights  Recommendations on participation of the Board of Directors in  Determination of the price at which the issuer repurchases - at the development and management processes related to IT and information request of shareholders - shares admitted to trading, taking into security risk management in public JSCs account their weighted average cost  Russian public JSCs are implementing mandatory risk management and  Legal uncertainty with regard to the votes of parties controlled by a internal controls party with an interest in the transaction has been eliminated  Implementation of an internal audit system will be mandatory for public JSCs since January 2021 Securities  Information disclosure reform: reduction of administrative burden on Securities issuance reform: the procedure of securities issuance was issuers, elimination of excessive requirements for information simplified, electronic registration of securities’ issues was launched disclosure (to be put in force since 1 October 2021) Green, Social and Sustainable Finance Next stage  Stewardship Code Providing the possibility to hold general meetings of shareholders online  Legal framework for Green, Social and Infrastructural Bond Issuance  Special Disclosure rules for Green, Social and Infrastructural Bonds’ Issuers  Mandatory right of redemption for green and social marked bond holders if capital allocated under Issuance was used improperly  Sustainable Development Sector for Bonds on Moscow Exchange  Two Sustainable Development Benchmarks (“Responsibility and Transparency”, “Sustainable Development Vector”) CBR corporate governance report: annual monitoring of corporate governance practices and publication of the report on the CBR official site (only in Russian) Source: Moscow Exchange FINANCIAL SECTOR OVERVIEW 47

COUNTERING MALPRACTICE Bank of Russia supervises conduct of financial market participants to promote fair competition

 Bank of Russia has implemented  In 2015, Bank of Russia became a signatory an effective system for countering malpractice to the IOSCO MMoU. such as market manipulation and insider  Intense cooperation with foreign financial trading, which is aimed at ensuring investors’ market regulators in terms of exchanging equality and fair pricing. information, including confidential information. Insider trading  Elaboration of international initiatives. International and market cooperation manipulation

Unlicensed firms Enhanced and pyramid consolidated scheme market analysis  Bank of Russia identifies companies operating on  Bank of Russia improves continuous monitoring the financial market without proper authorization of on-exchange trading for the purpose of (license) and running pyramid schemes, with a maintaining financial stability and preventing view to initiate responsive measures by the public system shocks caused by misconduct. authorities. The number of instances of such  On-exchange trades are supervised by the measures being taken by public authorities has Analysis Center to identify unusual activity increased almost 4x times in 2019 compared to online. 2018. The number of illegal lenders tends to decrease. FINANCIAL SECTOR OVERVIEW 48

INVESTMENT FUNDS Local institutional investor base: the potential of investment funds Figure 55: Majority of savings in Russia is held on bank deposits and in Figure 56: Assets of investments funds in Russia (RUB tn) cash* Bank deposits Cash Insurance and pension assets Securities Other Assets, RUB tn, lhs Assets to GDP, %, rhs 3% 3% 4.4% 7% 13% 11% 5.6 4.7% 16% 22% 26% 8% 5.2 4.5% 4.8 47% 4.3% 51% 60% 28% 21% 4.4 53% 4.1% 37% 4.0 56% 41% 6% 3.6 3.3% 3.9% 3.2 3.7% 2.8 3.5% 32% 21% 25% 59% 60% 2.4 41% 47% 3.3% 33% 2.0 25% 1.6 3.1%

14% 19% 15%

03.16 06.16 09.16 12.16 03.17 06.17 09.17 12.17 03.18 06.18 09.18 12.18 03.19 06.19 09.19 12.19 03.20 06.20 09.20 USA UK Germany Italy Brazil Mexico China India Russia 12.15

Figure 57: Number of investments funds in Russia by type Figure 58: Breakdown of investment funds’ assets by type (as of 30 September 2020) Closed-end Open-end Interval ETF Total 1,464 1,504 1,497 1,485 1,457 1,440 1,445 1,456 1,508 1,531 1,534 1,573 1,602 7% Cash 21 26 34 1 4 7 12 15 20 39 21% 37 39 43 36 40 43 41 Equities 43 42 40 37 36 256 257 331 327 325 312 303 268 267 265 264 255 254 23% Bonds Government bonds 1250 1272 1136 1131 1117 1,109 1,111 1128 1134 1143 1193 1216 1216 14% Foreign securities

6% Real estate 5% Authorized capital

17% 6%

12.17 03.18 06.18 09.18 12.18 03.19 06.19 09.19 12.19 03.20 06.20 09.20 09.17 Other

* As of the end of 2018, Russia - 2020 Source: World Bank, IMF, Bank of Russia, Moscow Exchange FINANCIAL SECTOR OVERVIEW 49

NON-STATE PENSION FUNDS Local institutional investor base: the potential of non-state pension funds

Figure 59: Pension assets in Russia (RUB tn) The Bank of Russia became a regulator of the pension Non-state pension funds. Reserves system in 2013. Since then a number of changes has Non-state pension funds. Mandatory savings been adopted to strengthen the non-state pension State pension fund. Mandatory savings system: 5.89 6.16 6.10 6.28 5.28 5.59 5.67  ‘one-year non-loss’ rule was extended to ‘five-year 4.76 1.33 1.41 1.39 1.43 3.82 3.97 1.11 1.21 1.25 non-loss’ rule 0.99 0.83 0.90 2.89  stress-testing mechanism introduced 1.71 2.15 2.47 2.64 2.74 2.85 2.82 1.09 1.13  customers are now encouraged to stay with the same 1.90 1.94 2.06 2.02 1.91 1.78 1.82 1.89 1.89 1.95 fund for not less than 5 years  since 2014 the Deposit Insurance Agency (DIA) 2014 2015 2016 2017 2018 1H19 2019 1Q20 2Q20 3Q20 guarantees the nominal value of mandatory savings Figure 60: Pension system asset allocation  non-state pension funds are to bear fiduciary (as of September 30, 2020, %) responsibility (since March 18, 2018) Cash Equities Corporate bonds Government bonds Other  non-state pension funds are to disclose their investment portfolios 6% 6%  corporatization of non-governmental pension funds 20% (NPFs) completed 35% 31% 16%  work is in progress to improve financial stability of private pension funds (development of legislation, 41% 54% 47% introducing mandatory state guarantee system for 18% 5% 11% 3% 6% voluntary pension plans and mechanisms of private State pension fund NPFs Mandatory savings NPFs Reserves pension funds financial recovery under the Bank of Russia management) Source: Bank of Russia FINANCIAL SECTOR OVERVIEW 50

INSURANCE Local institutional investor base: the potential of insurance market Figure 61: Premium volume is gradually growing Figure 62: Assets hit 3.6% of GDP

Premiums, RUB bn, lhs Assets, RUB bn, lhs Payment of claims, RUB bn, lhs Reserves, RUB bn, lhs Assets as % of GDP, rhs Premiums as % of GDP, rhs 3,811.0 450 405.1 1.7 4,000 3.8 1.6 3,500 3.6 3.5 350 3,000 3.3 1.4 1.5 2,410.8 2,500 3.0 1.4 2.8 250 194.6 2,000 2.5 1.3 1,500 2.3 150 1.2 1,000 2.0 1.8 1.1 500 1.5

50 1.0 0 1.3

06.15 09.15 12.15 03.16 06.16 09.16 12.16 03.17 06.17 09.17 12.17 03.18 06.18 09.18 12.18 03.19 06.19 09.19 12.19 03.20 06.20 09.20 12.20

06.15 09.15 12.15 03.16 06.16 09.16 12.16 03.17 06.17 09.17 12.17 03.18 06.18 09.18 12.18 03.19 06.19 09.19 12.19 03.20 06.20 09.20 12.20

Figure 63: Premium structure in 4Q20 shows high level of market Figure 64: In 4Q20 market remained highly competitive with the diversification Herfindahl-Hirschman Index equal to 698.3

Life insurance Capital, % Premiums, % Assets, %

28% 28% Corporate property insurance 81.5 Top-20 84.9 Private medical insurance 80.3

Motor car insurance 7% 72.9 14% Top-10 71.5 Compulsory motor TPL 65.3 12% insurance 11% Other 0 10 20 30 40 50 60 70 80 90 Source: Bank of Russia FINANCIAL SECTOR OVERVIEW 51

NATIONAL PAYMENT CARDS SYSTEM Setting the standards for the payment industry to provide convenient and stable services

Operator of Mir Card Payment System is National Card Payment System Joint Stock Company, 100% of its shares are held by the Bank of Russia

National Card Payment System As of year-end 2020 about 95 mln “Mir” payment cards was created on 23 July 2014 were issued in Russia

 Mobile payments and contactless service Mir Pay are developing  Support of mobile payment service Samsung Pay  Non-financial services are available on the basis of “Mir” payment cards

 Payment system “Mir” developing a loyalty program which allows card holders to receive % cashback (more than 15 mln “Mir” payment cards have already been connected)

 Co-badging projects with international payment systems: Maestro, JCB, AmEx and UnionPay  “Mir” payment cards are accepted in 12 countries, including the Republic of Armenia, Kyrgyz Republic, the Republic of Kazakhstan, the Republic of Belarus, Vietnam, Turkey, Cyprus FINANCIAL SECTOR OVERVIEW 52

PAYMENT INFRASTRUCTURE (1/3) Bank of Russia Payment System Money transfer services are provided to:  all credit institutions (financial market infrastructure included)  Russia’s Federal Treasury and its agencies  other Bank of Russia clients

Average daily figures (for 2020): 7.2 mln payments, Rub 7.4 tn

83% of funds are transferred via the real-time service

New liquidity management tools, future value date settlement functionality, cash-pooling services for Federal Treasury and multibranch banks introduced

Transfer timeframe is adapted to Russia’s 11 time zones - system operates from 1 a.m. to 9 p.m., Moscow time.

The Faster Payments System (FPS), launched on 28 January 2019, enables instant C2C interbank transfers 24/7/365 using mobile phone number and C2B (customer–to-business). C2G (customer-to-government) and G2C (government-to-customer) transactions are currently in the pipeline. Starting April 2020, B2C (broker’s and MFIs’ operations) have been enabled, July 2020 – C2C pull-operations (transfer on recipient’s approval). As of December 2020 the FPS is offered by 210 Russian banks, including all systemically important. Average monthly figures for 2020 - 29.4 mln transactions, Rub 202.8 bn. FINANCIAL SECTOR OVERVIEW 53

PAYMENT INFRASTRUCTURE (2/3) Supervision and oversight in the national payment system (NPS)

Supervision in the NPS - The Bank of Russia's activity to monitor the compliance of NPS entities with the requirements of the law on the NPS and the regulations of the Bank of Russia in order to ensure stability and development of the NPS.

Market access: • payment systems: registration of payment system operators (PSO) and foreign payment system operators • money transfer operators - credit organizations (including electronic money operators): licensing. The BoR publishes lists of payment application providers, payment aggregators, foreign payment Number of NPS entities service providers, information exchange operators. (as of October 2020) Money transfer operators- 416 credit organizations, including The subjects of supervision: electronic money operators 82 • functioning of the NPS entity separately; Payment system operators 27 • its relationship with other market participants, disruption of such relationships and systemic risks. Set of measures in respect of the supervised subjects is determined taking into account the established supervision mode

Off-site On-site Actions and 1 supervision 2 inspection 3 Measures Analyze the activities of NPS entities and Conduct on-site inspections of NPS Take actions and enforcement payment system participants as well as the entities’ compliance with the measures with regard to NPS entities in organization and functioning of payment requirements of the law on the NPS and case of violations of the requirements systems including payment infrastructure the regulations of the Bank of Russia of the law on the NPS FINANCIAL SECTOR OVERVIEW 54

PAYMENT INFRASTRUCTURE (3/3) Supervision and oversight in the national payment system (NPS)

The Bank of Russia's activity to encourage the improvement of the NPS entities' activities and services and to Oversight in the NPS - promote the development of objects of oversight in line with the recommendations of the Bank of Russia. 1 Monitoring 2 Assessment 3 Initiation of changes Collection, systematization and analysis of Assessment of the activities of the observed • Bank of Russia issues information on the activities of the observed organizations (PSO*) and related objects of oversight recommendations to the PSO on the organizations, other NPS entities and related in the context of best practices (in particular, the results of assessment. oversight objects document CPMI-IOSCO “Principles for financial • The PSO prepares an action plan for market infrastructures”) Main areas of monitoring implementation of such • Defining criteria for the importance of payment systems recommendations. * Operators of systemically and socially important and credit institutions significant in the payment • Bank of Russia monitors the payment systems (as of the beginning of 2020 there are 2 services market; implementation of recommendations systemically important payment systems and 4 socially • Identifying payment systems that meet the criteria of important payment systems). by the PSO significance, and credit institutions that meet the criteria of significance in the payment services market; • Identifying trends and development prospects for the Russian payment market. A report on the national payment system oversight results is published every two International cooperation in the field of oversight in the NPS: years  agreements (memorandums) on cooperation with foreign (national) banks;  interaction with international organizations, including the Committee on Payments and Market infrastructures (CPMI), World Bank. FINANCIAL SECTOR OVERVIEW 55

FINTECH (1) Russia provides a favorable environment for FinTech development Goals of the Bank of Russia as a high-tech regulator Facilitate the competition in the financial market Enhance accessibility, quality and range of financial services Lower risks and costs in the financial market Advance the level of competitiveness of Russian technologies

Key areas of development

1. Legal regulation of FinTech, including protection of consumer rights and security of personal data 2. Development of digital technologies in the financial market and development of digital infrastructure 3. Transition to electronic interaction between the Bank of Russia, government, market participants and their clients 4. “Regulatory Sandbox” for experimentation with innovative financial technologies, products and services 5. Cooperation within the Eurasian Economic Union and development of single payment area for member states 6. Ensuring technological safety and sustainability in FinTech implementation 7. Development of human resources in the financial market FINANCIAL SECTOR OVERVIEW 56

FINTECH (2) Russia provides a favorable environment for FinTech development

Main FinTech projects of the Bank of Russia and FinTech Assocition

Digital identification Established on 28 December 2016 by the Digital profile Bank of Russia with participation of the Faster payment system largest financial institutions Distributed ledger technology Main goals Open API Implementation of new technological Financial marketplace solutions for the development of the Russian financial market Promotion of digitalization of the Russian economy FINANCIAL SECTOR OVERVIEW 57

MARKETPLACE Shaping the future of financial services experience in Russia Equal access to financial market,  New system for online sales of financial financial inclusion, products Enhancing competitive Competition trusted environment environment and  Aimed to complement traditional sales optimizing financial Customers channels with websites and smartphone apps services, promoting which will enable customers to compare innovative businesses multiple financial product offers Fully digital services 24/7  In July 2020 the State Duma adopted the law Technologies for consumers, Open API, on financial transactions through a financial Digital customer profile, platform that enabled launching the The Faster Payments System, wider client base Marketplace system for innovative business models

Unified financial transactions register 12:50 (NSD) Bank of Russia supports Banks Bank deposits Bonds Funds Platform N Bonds Mortgage Platform 1 Funds MTPL insurance

Insurance Aggregator N Consumers Mortgage Producers of financial product Financial platforms For more details, see http://cbr.ru/eng/fintech/market_place/ FINANCIAL SECTOR OVERVIEW 58

CONSUMER PROTECTION Financial consumer and investor protection as one of priorities for further financial market development

KEY FINANCIAL CONSUMER PROTECTION WORKSTREAMS

Consumer and investor Differentiation of complaints handling consumer protection requirements

Financial literacy Conduct supervision improvement

Setting requirements for Disclosure requirements financial organizations in order to improve consumer and for consumers and investor protection investors

Dispute resolution Disclosure requirements (ombudsman) for information on risks FINANCIAL SECTOR OVERVIEW 59

FINANCIAL INCLUSION Strong international background helps to promote financial inclusion

G20 GLOBAL PARTNERSHIP FOR FINANCIAL ALLIANCE FOR INCLUSION (GPFI) FINANCIAL INCLUSION (AFI) ‒ Acts as an inclusive platform for G20 countries, non-members and other parties for knowledge and experience sharing, policy advocacy and coordination in promoting financial inclusion ‒ The global knowledge exchange network empowering ‒ Russia is an original GPFI member since November 2010 policymakers to increase access to quality financial services for the less well-off communities and ‒ Endorsed the ‘original’ FIAP in 2010 and the ‘updated’ FIAP in 2014, 2017 and 2020 households ‒ G20 – World Bank – OECD conference on empowering consumers of financial ‒ In February 2014, the Bank of Russia became a products and services was hosted in Moscow in June 2013 member of AFI ‒ The third annual GPFI Forum was held in St. Petersburg in 2013 ‒ In September 2014, the Bank of Russia joined the Maya Declaration setting up the priorities for AFI Financial Inclusion Promotion by the Bank of Russia members on financial inclusion ‒ Improving financial inclusion for people and SMEs was one of financial market ‒ In September 2015, the Bank of Russia joined the development priorities for 2016-2018, the importance of the issues was further Maputo Accord to improve funding accessibility for affirmed for the period of 2019-2021 SMEs ‒ The Bank of Russia annually publishes financial inclusion indicators and the Report ‒ In November 2015, the Bank of Russia and AFI co- on Financial Inclusion in Russia (with supply-side and demand-side data starting hosted the ‘Financial inclusion and shadow banking: from 2015) innovation and proportional regulation for balanced ‒ The technical note on financial inclusion was prepared in the context of a joint WB growth’ conference / IMF FSAP mission in Russia during February-March 2016; the note was published in May 2016 ‒ In June 2016, the Bank of Russia hosted the AFI GSPWG meeting. ‒ Early in 2018, the Bank of Russia launched the Financial Inclusion Strategy in Russia for the period of 2018-2020 ‒ The Bank of Russia hosted the 2018 AFI Global Policy Forum ‒ Since April 2020, the Bank of Russia has been empowered by law to exercise functions aimed at increasing financial literacy of individuals and SMEs and at ensuring financial inclusion FINANCIAL SECTOR OVERVIEW 60

AML/CFT Bank of Russia maintains AML/CFT regulation and supervision of credit institutions and non-credit financial institutions Russian AML/CFT law is based on International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation (FATF Recommendations)

2008 2013 2018 – 2019 The FATF placed Russian The FATF recognized that Russia 4th round of mutual evaluations, Federation in the regular could be removed from the joint FATF/MONEYVAL/EAG evaluation of Russia; follow-up process regular follow-up process Russia has been placed in the regular follow-up process

The findings of the FATF on the Bank of Russia's actions and financial institutions’ performance in the AML/CFT area:  The Bank of Russia's deep understanding of ML/TF risks in the supervised sectors  Improvement of the Bank of Russia’s risk assessment methodology and risk-based AML/CFT supervision  Implementation of an intense bank supervisory programme informed by ML/TF risks  Substantial improvement of the framework for preventing criminals from owning and controlling financial institutions  Adequate level of cooperation between the Bank of Russia and other Russian competent authorities in the AML/CFT area  Good understanding of ML/TF risks by credit institutions  Growth of the overall AML/CFT compliance by financial institutions, including due to the Bank of Russia's supervisory measures FINANCIAL SECTOR OVERVIEW 61

CYBERSECURITY Key initiatives in information security and Key avenues of cooperation in information security cybersecurity

Collecting, processing and exchanging information on 1. Exchanging information on computer attacks computer attacks in credit and finance

Analyzing the differences among jurisdictions, and sharing available internal practices with regard to how 2. Sharing regulations and best practices central banks protect themselves and financial institutions Holding consultations, seminars and conferences on best practices in countering computer attacks in credit 3. Countering online misconduct in credit and finance and finance Providing assistance in returning funds stolen through fraud

4. BRICS Best Practices Compilation as a topic for 2021 Developing a compilation of the BRICS countries’ Best Practices in information security 62

INVESTOR CONTACTS AND REGULAR MEETINGS SCHEDULE FOR 2021**

February 5-12 Quiet period July 16-23 Quiet period February 12 Board of Directors pivotal meeting on monetary policy. July 23 Board of Directors pivotal meeting on monetary policy. Publication of an updated medium-term forecast. Publication of an updated medium-term forecast. February 17, 17:00 Conference call with institutional investors July 28, 17:00 Conference call with institutional investors (Moscow time) (Moscow time) March 12-19 Quiet period September 3-10 Quiet period March 19 Board of Directors meeting on monetary policy September 10 Board of Directors meeting on monetary policy April 9-11* Ad-hoc meetings with investors on the sidelines October 15-17* Ad-hoc meetings with investors on the sidelines of the IMF/WB meetings of the IMF/WB meetings April 16-23 Quiet period October 15-22 Quiet period April 23 Board of Directors pivotal meeting on monetary policy. October 22 Board of Directors pivotal meeting on monetary policy. Publication of an updated medium-term forecast. Publication of an updated medium-term forecast.

April 28, 17:00 Conference call with institutional investors October 27, 17:00 Conference call with institutional investors (Moscow time) (Moscow time) June 4-11 Quiet period December 10-17 Quiet period June 11 Board of Directors meeting on monetary policy December 17 Board of Directors meeting on monetary policy International Cooperation Department Tel.: +7 (495) 771-90-68 Email: [email protected] Web-site: cbr.ru/eng/about_br/irp/

* tbc. ** Additional ad-hoc conference calls for institutional investors may be held in the periods between the Bank of Russia Board of Directors pivotal meetings.