Bank of Russia to revise risk ratios for consumer loans

The Bank of Russia plans to revise the scale of risk ratios for consumer loans depending on their effective interest rates (EIRs). It is proposed that the relevant amendments be made to Bank of Russia Instruction No. 180-I ‘On Banks’ Required Ratios’.

This decision is intended to, on the one hand, ensure quality growth of banks’ loan portfolios and, on the other, keep household debt burdens in check while improving overall financial system stability.

For loans with the EIRs ranging between 10-15% the risk ratio of 130% would be established (vs the current 100%); the risk ratio for loans with the 15-20% EIR would equal 150% (vs the current 110%); the risk ratio for loans with the EIR of 20-25% would equal 180% (vs the current 120%); and that for loans with the EIR of 25-30% would be 200% (vs the current 140%).

Requirements will extend to banks holding universal and basic licences; they will apply to consumer loans advanced after 1 September 2018.

The rationale behind these changes is acceleration in unsecured consumer lending. Data as of 1 June 2018 show loan receivables increased 15.7% over the last 12 months. Annualised average monthly growth rates of loan debt for the March to May 2018 period total 17.8% (seasonally adjusted). The available preliminary 2018 Q2 data suggest there is a trend towards further loan debt acceleration.

Several major retail banks’ lending activity is ahead of their forecasts for loan portfolio extension announced early in the year. This will push full-year growth paces of loan portfolios higher in 2018. Loan receivables growing faster than household income (the latter between January and May 2018 was up 5% in nominal terms on the same period last year) leads to increased households’ debt burdens and the build-up of risks in the banking system.

The Bank of Russia's Banking Regulation Department welcomes feedback on the proposed changes before12 July 2018.