On countercyclical buffer to capital adequacy ratio

The Bank of Russia Board of Directors decided to retain the countercyclical capital buffer (CCB) rate for Russian credit institutions at zero per cent of risk weighted assets.

Lending activity in the economy remains moderate, despite the fact that gradual recovery is emerging in its individual segments. The lending to non-financial organisations segment, the largest by loan receivables, shows a sustainable trend towards a rise in loan receivables in rubles and a decline in loan receivables in foreign currency. As of 1 June 2017, receivables in the portfolio of ruble loans to non-financial organisations and households have grown by 2.8% since the start of the year (a 12-month growth was 4.3%). Adjusted for exchange rate revaluation, the portfolio of foreign currency loans to non-financial organisations and households shrank by 2.8% over the same period (a 12-month reduction was 5.9%).

Moderate growth is seen in unsecured consumer lending as the banks keep to fairly conservative lending strategies. In both March and April 2017, monthly paces of growth in loan receivables, for operating banks, were in positive territory at 0.8%¹, whereas prior periods saw these receivables declining. Loan receivables have grown since the start of the year by 1.4%, and 1.2% for the twelve months.

In the mortgage lending sector, annual paces of growth in loan receivables have been sustainable over the past 12 months (annual growth paces of loan receivables, for operating banks, adjusted for foreign exchange fluctuations, were 12.2% as of 1 May 2017). Given the gradually rising proportion of mortgage loans in the portfolios of loans extended to individuals, the Bank of Russia monitors, on a regular basis, developments in this market segment including through stress-tests. The recent stress-test results suggest that there are no risks in the banking sector stemming from active mortgage lending or a change in the quality of mortgage loan portfolios.

In making a national countercyclical buffer decision, the Bank of Russia considers, beyond the standard methodology for credit gap² analysis, current debt loads in the economy, paces of growth in loan receivables across market segments, as well as lending conditions for banks’ borrowers and other meaningful conditions. As the lending recovery has been gradual and varied across segments, credit gaps estimates (see the table) remain in negative territory. This suggests that lending remains below a level of a long-term trend.

In recognition of the moderate growth in lending activity in the economy alongside banks’ continued fairly conservative approach to issuance of loans to borrowers, the Bank of Russia deems it appropriate that the national countercyclical capital buffer be retained at zero.

The Bank of Russia Board of Directors will hold its next CCB rate review meeting in September 2017.

¹ Credit institutions’ financial statements as per Form 0409115 (Section 3, Loan receivables on other consumer loans grouped into a homogeneous loan portfolio).

² Calculated as a deviation of the actual credit to GDP ratio, adjusted for currency revaluation, from its long-term trend.

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