Bank of Russia supports lending to small businesses and eases regulation for banks with a basic licence
The adopted changes set out a separate procedure for the formation of reserves for homogeneous loan portfolios to small and medium-sized enterprises where the risk assessment is carried out based on internal bank assessments of borrowers’ creditworthiness without the use of their official accounting statements.
A similar procedure may be applied to homogeneous claim portfolios (contingent credit liabilities) pertaining to small and medium-sized enterprises.
The amendments establish the possibility of grouping loans issued to individuals whose biometric personal data is possessed by credit organisations into homogeneous loan portfolios with reduced loss provisions.
100% of the provisions is not applied in loan cases where it has been revealed that invalid documents proving the borrower’s identity were used but the borrower’s biometric personal data is available.
The amendments specify the criteria used when setting provisions to determine the creditworthiness of real estate developers that use escrow accounts in equity construction projects.
In addition, credit organisations are granted the right to decide on refraining from lowering the quality of debt servicing for mortgage loans issued to borrowers who decide to take a mortgage payment holiday, regardless of the assessment of their financial situation, and will therefore be able to not increase the size of loss provisions.
Furthermore, regulatory easing for banks with a basic licence is introduced against the backdrop of implementing proportionate regulation. In particular, the amendments set out that such banks are not obliged to apply the increased ratio of 2.0 when calculating the maximum level of exposure per borrower or group of related borrowers (N6) with respect to claims on organisations where the state is the sole founder; on borrowers, where such were classified as quality category I or II for the purpose of formation of possible loss and loan loss provisions at the moment of receiving a loan from a bank with a basic licence (this benefit will be valid for 5 years from the date the creditor bank changes its status to that of “bank with a basic licence”); and on SMEs from the date of their exclusion from the unified register of small and medium-sized enterprises to the end of the year in which the exclusion occurred.
Also, for banks with a basic licence, the minimum number of individual SME borrowers, claims on which can be included in the regulatory retail portfolio with the application of a reduced coefficient of 75% has been halved (from 100 to 50).
Ordinances on the introduction of amendments to the Bank of Russia Regulation No. 590-P, dated 28 June 2017, ‘On the Procedure for Credit Institutions to Make Loss Provisions for Loans, Loan and Similar Debts’, amendments to the Bank of Russia Regulation No. 611-P, dated 23 October 2017, ‘On the Procedure for Credit Institutions to Make Loss Provisions’ and amendments to the Instruction of the Bank of Russia No. 183-I, dated 6 December 2017, ‘On the Required Ratios of Banks with a Basic Licence’ were registered with the Ministry of Justice and are to come into force on 24 September 2019.