Bank of Russia publishes macroprudential policy act for consultations

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The procedure of setting macroprudential buffers and the list of assets that can be subject to such buffers are determined by the document prepared by the Bank of Russia and published for discussion on the regulator’s website. Suggestions and comments to the draft ordinance ‘On risk ratio buffers for certain asset types and characteristics of asset types subject to setting risk ratio buffers’ will be accepted by 11 May 2018.

The decisions on buffer values and corresponding asset characteristics will be taken by the Bank of Russia Board of Directors.

Necessary amendments will also be made to Bank of Russia Instruction No. 180-I, dated 28 June 2017, ‘On Banks’ Required Ratios’. Its draft will be published later. The transition to the new scheme will not entail an increase in capital adequacy requirements.

The key proposed innovation is the intended transition to using the debt burden indicator (DBI) to differentiate buffers for consumer loan risk ratios. In February 2017, the Bank of Russia published a consultative report on the debt burden, and as a result of discussions it was decided to evaluate the debt burden using the ratio of the average monthly payment to debtor’s income. In October 2017, the Bank of Russia presented its DBI calculation concept. On the back of the discussions with the financial community, the calculation procedure was adjusted when the ordinance was being prepared.

The ordinance is envisaged to become effective in the second half of 2018. It is expected that DBI calculation will be mandatory since 1 January 2019. Next year, after calibrating the risk level dependency on DBI, it is planned that DBI will be used to set macroprudential buffers for consumer loans. The ordinance will be effective for banks with both universal and basic licences. In the future, the Bank of Russia also intends to make DBI calculation mandatory for microfinance organisations and use it for the purpose of their regulation.

In March 2018, amendments to Federal Law No. 86-FZ, dated 10 July 2002 ‘On the Central Bank of the Russian Federation (the Bank of Russia)’ came into force whereby the Bank of Russia was vested with the authority to carry out its macroprudential policy, i.e. the policy to ensure financial stability. The regulator’s experience in conducting the macroprudential policy includes the application of risk ratios differentiated depending on the effective interest rate on credit (loan) to mitigate risks associated with unsecured consumer loans (since 2013) and the application of increased risk ratios for claims to non-financial organisations (since May 2016). Before the amendments to the legislation, the Bank of Russia conducted its macroprudential policy by updating banks’ prudential regulatory framework.

13 April 2018

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