Bank of Russia discourages M&A lending
With respect to loans to fund mergers and acquisitions, beginning on 1 October 2021, banks’ discretion about upgrading a quality category (upgrading category III to II) with phasing of additional provisions is conditional on positive operational performance of borrowers.
The rule is meant to discourage banks from lending intended to fund authorised capital investments that do not lead to economic growth.
Under a Bank of Russia ordinance, for collateral used to minimise loss provisions, the statutory period of forced sale of collateral has been extended from 270 to 365 days. This will give banks more opportunities in accounting of collateral to reduce provisions.
Banks will be able to continue to apply SME lending principles within one year from the date a SME was struck off the SME Register. The measure will provide more certainty in SME lending to banks, which will help expand loans to fast-growing businesses.
The regulatory document includes several other amendments related to, among other things, accounting of the pledge of claims of equity construction participants, and the recognition of a security deposit as quality category I security for loan loss provisions.
The amendments come into force on 24 May 2021.