Bank of Russia to change credit risk assessments on consumer loans and loans to Russian constituent entities

In addition, for credit cards where borrowers repay their debt before the interest is due, a subportfolio with a reduced risk ratio of 45% will be carved out.

These changes are proposed in a draft Bank of Russia ordinance. They are based on the new standardised Basel III approach and will provide a more precise assessment of credit risk on consumer loans. For banks competently managing credit risk in retail lending, this measure may have a positive effect in terms of capital adequacy and increase the potential of lending to the economy.

In addition, due to amendments to the Budget Code, the Bank of Russia will introduce a new approach to assessing credit risk for claims on Russian constituent entities and municipalities depending on their level of debt sustainability (high, medium, and low).

Risk ratios on loans with medium and low levels of debt sustainability will be raised. As a result, banks will be able to more accurately assess risks in lending to regions, which will also help reduce the debt burden of the constituent entities of the Russian Federation.

The draft ordinance also contains other amendments, including the clarification of the procedure for assigning corporate borrowers to the investment class: the requirement to include securities in exchange quotation lists is excluded.