OPEN JOINT-STOCK COMPANY SBERBANK OF RUSSIA Deputy Chairman of the Executive Chief Accountant - Director of Board Accounting and Reporting Division of Sberbank of Russia Sberbank of Russia V.V. Kulik M.Y. Lukyanova ________________________________ ________________________________ _______________________, 2014 __________________________, 2014 Disclosure of Information on Accepted Risks, Procedures for Their Assessment, Management of Risks and Capital of Sberbank of Russia Banking Group as of July 1, 2014 Moscow 2014 Disclosure of information on assumed risks, procedures for their assessment, management of risks and capital of Sberbank of Russia OJSC Banking Group as of July 1, 2014. CONTENTS LIST OF TABLES .......................................................................................................................... 3 INTRODUCTION ........................................................................................................................... 5 1 GENERAL INFORMATION ON SBERBANK OF RUSSIA BANKING GROUP ACTIVITIES ................................................................................................................................... 5 1.1 General information on the parent company of Sberbank of Russia Banking Group ...... 5 1.2 Information on the lines of business of Sberbank of Russia Banking Group ................... 6 1.3 Brief information on the economic environment where Sberbank of Russia Banking Group operates ............................................................................................................................. 6 1.4 Structure of banking group participants ............................................................................ 8 2 INFORMATION ON RISKS ACCEPTED BY THE BANKING GROUP, PROCEDURES FOR THEIR ASSESSMENT AND ARRANGEMENT OF THEIR MANAGEMENT .............. 12 2.1 Strategies of Sberbank of Russia Banking Group in risk and capital management ....... 12 2.1.1 Strategies of Sberbank of Russia Banking Group in risk management ................... 12 2.1.2 Capital adequacy management ................................................................................ 15 2.2 Structure and Organization of Operation of Subsidiaries Undertaking Risk Management within the Banking Group and Members of Sberbank of Russia Group ................................... 16 2.3 Risk Identification Methods of Sberbank of Russia Banking Group ............................. 21 2.4 Determining Risk Appetite of Sberbank of Russia Banking Group ............................... 22 2.5 Procedure of Stress Test Application at Sberbank of Russia Banking Group for Risk and Capital Management ........................................................................................................... 24 3 RISK AND CAPITAL MANAGEMENT OF SBERBANK OF RUSSIA BANKING GROUP .......................................................................................................................................... 26 3.1 Capital structure and capital adequacy of Sberbank of Russia Banking Group ............. 26 3.1.1 Value and key components of capital of Sberbank of Russia Banking Group........ 26 3.1.2 Information on the value of risk-weighted assets of Sberbank of Russia ............... 28 3.1.3 Information on actual and normative values of basic capital, core capital, and equity (capital) adequacy ratio of Sberbank of Russia Banking Group ................................ 29 3.2 Data on significant risks arising in the activities of Sberbank of Russia Banking Group 30 3.2.1 Credit Risk ............................................................................................................... 30 3.2.2 Market risk of a trading book .................................................................................. 64 3.2.3 Interest and currency risks of the banking book ...................................................... 66 3.2.4 Operational risk ....................................................................................................... 70 3.2.5 Other significant risk types ...................................................................................... 76 2 Disclosure of information on assumed risks, procedures for their assessment, management of risks and capital of Sberbank of Russia OJSC Banking Group as of July 1, 2014. 4 WAGE POLICY OF THE BANKING GROUP ................................................................... 84 4.1 Wage Policy .................................................................................................................... 84 4.2 Risk-Based Remuneration System .................................................................................. 85 APPENDIX 1. LIST OF GROUP MEMBERS ACCOUNTED FOR IN MANAGEMENT COMPANY STATEMENTS ........................................................................................................ 86 APPENDIX 2. LIST OF GROUP MEMBERS, WHO ARE INSIGNIFICANT ACCORDING TO THE GROUP'S ACCOUNTING POLICY ............................................................................. 89 LIST OF REGULATORY DOCUMENTS ................................................................................... 92 LIST OF TERMS .......................................................................................................................... 93 LIST OF ABBREVIATIONS ....................................................................................................... 94 FORECASTING COMMENTARY .............................................................................................. 96 LIST OF TABLES Table 1.1 List of Group participants ................................................................................................ 8 Table 1.2 Participants of the Group, which are recognized as major participants of Sberbank of Russia Banking Group ................................................................................................................... 11 Table 1.3 Information on insurance companies participating in Sberbank of Russia Banking Group ............................................................................................................................................. 11 Table 2.1 List of Indicators Comprising Risk Appetite of Sberbank of Russia Banking Group .. 23 Table 2.2 List of Indicators Comprising Risk Appetite of Sberbank of Russia ............................ 23 Table 3.1 Capital structure............................................................................................................. 28 Table 3.2 Risk-weighted assets ..................................................................................................... 29 Table 3.3 Capital adequacy ratios ................................................................................................. 29 Table 3.4 Assets of the banking group of Sberbank of Russia, provisions for which are made individually .................................................................................................................................... 46 Table 3.5 Provisions for possible losses on assets of the banking group of Sberbank of Russia, provisions for which are made individually .................................................................................. 48 Table 3.6 Assets of the banking group of Sberbank of Russia exposed to the credit risk, provisions for which are made on the portfolio basis .................................................................... 50 Table 3.7 Assets of the banking group of Sberbank of Russia exposed to the credit risk, segmented by economic sectors .................................................................................................... 52 Table 3.8 Assets of the banking group of Sberbank of Russia exposed to the credit risk, segmented by geographic regions.................................................................................................. 53 Table 3.9 Allocation of loans and advances to clients of the banking group of Sberbank of Russia depending on the terms to maturity ............................................................................................... 53 Table 3.10 Allocation of loans and advances to clients of the banking group of Sberbank of Russia by loan currency ................................................................................................................. 54 Table 3.11 Dynamics of provisions for possible losses under loans in the portfolio of the banking group of Sberbank of Russia, RUB bln ......................................................................................... 54 Table 3.12 Restructured loan portfolio of the banking group of Sberbank of Russia, RUB bln... 55 3 Disclosure of information on assumed risks, procedures for their assessment, management of risks and capital of Sberbank of Russia OJSC Banking Group as of July 1, 2014. Table 3.13 Overdue loans of the banking group of Sberbank of Russia, provisions for which are made on an individual basis .......................................................................................................... 56 Table 3.14 Overdue loans of Sberbank of Russia, provisions for which are made on the portfolio basis ............................................................................................................................................... 58 Table 3.15 Repayment risk on the transactions with financial derivatives for the Sberbank of Russia Banking Group, RUB mln ................................................................................................