Bank of Russia to update provisioning procedure for banks

The amendments stipulate, among other things, requirements for the classification of loans to Russian constituent entities and municipalities depending on their level of debt sustainability to be determined in accordance with the Budget Code. Loans to Russian constituent entities with a medium level of debt sustainability are to be classified not better than quality category III and those issued to entities with a low level of debt sustainability are to have quality category V.  Earlier such loans were assessed according to the usual procedure based on the analysis of their financial standing and debt service quality.

Investment period for loans facilitating implementation of investment projects under agreements on protection and promotion of capital investments in Russia, is to be extended to five years provided certain conditions are met. During this period, banks are permitted to make no loan loss provisions if there are no outstanding payments under the loan or amounts of such payments are small. This period used to be two years.

The document provides for other amendments related, among other things, to the assessment of actual status of a borrower’s activity as applied to lending to consumer credit cooperatives, agricultural consumer credit cooperatives, microcredit companies and pawnshops if they meet certain criteria.