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Bank of Russia’s measures to support small and medium business

24 March 2020

The Bank of Russia recommends that lenders restructure loans issued to small and medium-sized enterprises and self-employed individuals if their financial standing has deteriorated due to the spread of the coronavirus. This is specified in the information letters sent by the regulator to credit institutions, microfinance organisations and consumer credit cooperatives.

This measure will support small and medium-sized enterprises (SMEs) facing a difficult situation and help them maintain their capability to comply with their obligations in the future.

The regulator also recommends that SMEs that submit a corresponding application be granted a postponement of repayment of the remaining principal amount and interest. At the same time, it is recommended that lenders do not charge fines or penalties for borrowers’ incompliance with the terms of loan agreements.

The Bank of Russia notes that, when making a decision on the form of restructuring, lenders should assess the actual capability of entrepreneurs to repay loans and take into account their own obligations, including to depositors.

In turn, the regulator has provided credit institutions with an opportunity not to increase loss provisions on loans to SMEs until 30 September 2020 if borrowers’ financial standing has deteriorated due to the spread of the coronavirus.

Microfinance organisations (MFOs) and consumer credit cooperatives (CCCs) are allowed not to increase loss provisions on loans overdue after 1 February 2020. Regarding similar restructured loans, it is allowed not to recognise them as such when creating loan loss provisions.

The regulator recommends that credit institutions, MFOs and CCCs submit information about respective decisions made by their authorised management bodies along with the rationale behind them when submitting reporting to the Bank of Russia. The rationale should include documents evidencing that borrowers’ financial standing (debt service quality or loan quality category) has deteriorated due to the spread of the coronavirus.

These recommendations are included in the package of economy support measures developed by the Bank of Russia.