Bank of Russia to adjust debt service-to-income ratio and amend mortgage requirements for banks
The Bank of Russia has drafted a new version of the regulation on macroprudential add-ons and the calculation of the debt service-to-income ratio (DSTI).
Most of the amendments deal with the use of internal models of banks employed to determine a borrower’s income when calculating the DSTI.
In particular, some requirements for models were adjusted. For example, amendments are made to use more up-to-date income data: when developing models based on the income stated by a borrower, the horizon for monitoring their credit quality is reduced from 12 to six months. The criteria for evaluating the quality of models are also clarified.
The draft provides for the following exemptions for banks when calculating the DSTI.
Since macroprudential limits restrict the share of unsecured consumer loans with a maturity of over five years, a proposal is put forward to remove the excessive disincentive of long-term consumer loans by the conservative calculation of the DSTI (to abolish the requirement for the calculation of the average monthly payments under long-term loans based on a four-year maturity).
There are also plans to allow banks to use until the end of 2023 internal methods for assessing a borrower’s income (without their approval by the Bank of Russia) for loans of up to 50,000 rubles and car loans when calculating the DSTI.
Also, the draft adjusts certain mortgage-related provisions.
In particular, it is proposed to limit risky mortgage lending practices involving overestimation of the cost of housing in the primary market. Credit institutions will be required to apply risk-weight add-ons in respect of loans for housing purchased under an equity construction contract, including within a year after its commissioning.
The draft clarifies the conditions under which risk-weight add-ons are not applied to mortgage loans issued under government support programmes: the current criterion (the DSTI is no more than 60%) is supplemented with a requirement for a minimum down payment (at least 30%). The draft also sets a closed list of government programmes.
The Bank of Russia looks forward to receiving banking community's feedback before 10 March 2023.