The rating tier revision primarily follows a deterioration of the Bank's liquidity position in the third quarter of 2015. In the accounting period, the N3 ratio decreased by 9.4 p.p. to 53.65% as of November 1, 2015 while the minimum acceptable percentage is 50%. Our analysts believe that this deterioration increases liquidity risks should a stress scenario play out.

Another point of concern is a substantial increase in the turnover of outstanding (incomplete) transfers of client funds denominated in foreign currencies (balance account 30220). Since June 2015, the amount of such outstanding transfers has increased more than twice from RUB 404 million to RUB 953 million.

At the same time, we appreciate the Bank's efficiency in maintaining a high level of equity capital adequacy as a positive rating driver. The N1.0 ratio never fell below 22% this year reaching 23.55% as of November 1, 2015, while the minimum acceptable level set by the regulatory authority is 10%. This margin provides opportunities for the development of the Bank's operations with a view to increasing aggregate earnings and offsets risks if higher provisions are needed.

AK&M Rating Agency assigned a credit rating to Bank of Development of Technologies for the first time on August 5, 2009. The last rating action in relation to the Bank was taken on August 12, 2015. All rating action announcements are available on the akmrating.ru website.

For estimation purposes, we completely rely on the reliability of information provided by the Client. The rationale for AK&M Rating Agency's judgment on the rating may include information acquired from other sources we deem to be reliable; however, the agency does not check the input data exhaustively and disclaims all responsibility for their possible errors.

The rating assignment is based on the monitoring results of the current credit rating assigned to Bank of Development of Technologies and the Credit Rating Methodology for Banks and their Debt Instruments rev. February 24, 2015.

The rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Bank's creditworthiness and shall not be construed as a recommendation to purchase or sell securities, or to lend funds.

AK&M Rating Agency shall not be held liable for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.

AK&M Rating Agency is a leading independent national rating agency engaged in rating activities since 1993. CJSC AK&M Rating Agency is accredited by the Ministry of Finance of the Russian Federation (order no. 452 as of September 17, 2010) and is on the Central Bank of Russia's Register of Accredited Rating Agencies.

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