Bank of Russia clarifies debt burden calculation procedure
The amendments to Bank of Russia Ordinance No.
In particular, the Bank of Russia has improved the method for accounting of average monthly payments on unsecured consumer loans with a maturity of over 5 years (the maximum loan tenor for debt burden calculation has been limited to 60 months). This change will help prevent improper extension of periods of loans granted to borrowers with a high debt burden.
In addition, the regulatory requirements for using risk-based buffers will no longer be applicable to loans provided within the subsidised education loan programmes, as well as government-supported housing loan programmes where a borrower purchasing housing has a debt burden of no more than 60%.
According to the clarified procedure, banks are authorised not to calculate debt burden when a loan contract is amended to reduce a borrower's debt burden or to offer more favourable loan repayment terms, as well as in case of mortgage payment holidays.
The modified debt burden calculation method takes into account the income of individuals that are owners (shareholders) of large and medium businesses whose lending approaches differ from retail loan processes.
The clarified procedure amends the approach to measuring a borrower's imputed income identified based on the credit history bureau's credit report. This will help avoid underestimating the income of borrowers with long-term positive credit histories who have had no loan obligations during a short period of time.
After the amendments become effective, banks should apply the maximum buffer to risk ratios for those loans where debt burden was not calculated by banks, including cases due to a lack of appropriate technical capabilities.
To ensure prompt response to systemic risks, the resolution of the Bank of Russia Board of Directors on buffer increase for certain asset types will become effective two months (and not three as before) after the publication of the resolution on the Bank of Russia website.
In addition, the amendments have aligned the codes of assets to which risk buffers are applicable. The corresponding amendments have also been introduced into Bank of Russia Ordinance No.