Bank of Russia prepares new instruments to limit retail lending risks more efficiently
The Bank of Russia plans to apply macroprudential limits (MPLs) to banks and microfinance organisations in mortgage and car lending in order to address the issue of elevated debt burden among individuals more efficiently and to maintain the stability of the financial sector. The regulator has analysed the use of the MPLs in unsecured consumer lending and prepared the approaches to setting the MPLs in other segments as well.
The analysis shows that, compared to macroprudential add-ons, the MPLs help reduce the proportion of risky loans more quickly. Furthermore, risk accumulation in mortgage lending may involve serious social consequences.
The MPLs will be introduced in mortgage lending stage by stage. The Bank of Russia expects that it will thus be possible to decrease the macroprudential add-ons, currently applied in this segment to limit risks, from the restrictive level.
The draft law enabling the Bank of Russia to set the MPLs in mortgage and car lending is to be considered by the State Duma in the second reading in the near future. The relevant amendments may become effective from 1 April 2025.