Bank of Russia retains national countercyclical capital buffer
The Bank of Russia Board of Directors has decided to retain the countercyclical capital buffer rate for Russian credit institutions at zero per cent of risk-weighted assets.
In making its decision to retain the national countercyclical buffer, the Bank of Russia proceeded from the following.
Lending activity and credit risks
Lending to the economy by the banking sector is growing sustainably. The annual growth of outstanding amounts were 13.9% as of 1 June 2021, with retail lending growing at a faster pace.
In the unsecured consumer lending segment, the annual growth of outstanding loans was 15.2%1 as of 1 June 2021. The leading indicator of lending activity, expressed through the annualised growth of outstanding amounts over three recent months (roughly 19% on 1 June 2021), suggests a pickup in lending. To curb the risks of accelerated growth of outstanding amounts on unsecured consumer loans, earlier, the Bank of Russia decided to resume from 1 July 2021 the application of macroprudential requirements, that had been in place before the pandemic. Should the trend towards a faster growth in lending, by far outpacing the growth of households incomes, persist, the Bank of Russia will consider a further increase of macroprudential add-ons on unsecured consumer loans. The regulator will take into account the situation in the banking sector and lending in general, including due to the worsening epidemic situation.
The annual growth of outstanding loans in the housing mortgage segment remains high: ruble-denominated mortgage loans increased by 26.4% as of 1 June 2021.2 The change, from 1 July 2021, of the government’s mortgage interest rate subsidy programme will help reduce elevated demand for housing acquired for investment purposes observed in the largest cities. It will cool down housing prices, support the balanced growth of this segment, and help preserve the affordability of housing for individuals. Seeking to maintain the standards of mortgage lending, the Bank of Russia decided to increase add-ons on mortgage loans with down payments of 15% to 20% from 1 August 2021.
Banking sector stability and measures to support households and businesses
The banking sector has a considerable safety cushion of 6.0 trillion rubles,3 as well as a macroprudential capital buffer of 641 billion rubles which may only be released based on the relevant decision of the Bank of Russia. A part of the accumulated macroprudential buffer in the amount of 124 billion rubles may be released by banks from 30 June 2021 in line with the Bank of Russia’s decision. This measure will help banks exit temporary regulatory easing introduced by the Bank of Russia at the onset of the pandemic without weighing heavily on capital adequacy ratios.
Given the resumption of Bank of Russia macroprudential measures which were in place in the mortgage and unsecured consumer lending before the pandemic, as well as the deteriorating epidemic situation, it seems unreasonable to change the value of the national countercyclical capital buffer.
The Bank of Russia Board of Directors will hold its next countercyclical capital buffer review meeting in September 2021.
1 According to Section 3 of reporting form 0409115. With regard to operating credit institutions (including reorganised ones).
2 According to reporting form 0409316 and reporting form 0420863 containing information on outstanding amounts under securitised mortgage loans. Including acquired rights of claim.
3 According to reporting forms 0409135 and 0409123. The calculated value as of 1 May 2021 is the minimum buffer to absorb losses estimated based on three ratios, as well as based on reclassified unaudited Tier 1 profits and the positive effect of loss on risk-weighted assets.
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