Bank of Russia supports development of SME lending against regional guarantee organisations’ sureties
On 31 March 2023, the Bank of Russia made the decision to differentiate sureties (independent guarantees) of regional guarantee organisations (RGOs)1 based on the quality categories of collaterals taken into account to minimise the amount of provisions to be made according to Chapter 6 of Regulation No. 590‑P.2
Pursuant to the effective requirements of Subclause 6.3.4 of Regulation No.
In accordance with the decision of the Bank of Russia Board of Directors, credit institutions are allowed to classify RGOs’ sureties as collaterals of the first quality category if such sureties simultaneously comply with the following ratings assigned by JSC Russian Small and Medium Business Corporation:
- financial stability rating ‘AA’;3 and
- performance rating ‘E+’4 or ‘E’.5
Alongside with that, sureties of RGOs whose financial stability rating is ‘C’6 will not be taken into account for minimising the provisions to be made, except RGOs’ sureties issued before the effective date of the decision of the Bank of Russia Board of Directors.
This decision will help more accurately estimate potential losses and calculate the amount of provisions to be made for loans, other claims and contingent credit liabilities secured by RGOs’ sureties and will encourage RGOs to maintain their financial stability at a high level.
The decision is temporary and will be effective through 31 December 2023. Over this period, the Bank of Russia, relying on the experience and expertise of JSC Russian Small and Medium Business Corporation and Russia’s Ministry of Economic Development, plans to develop its own criteria of RGOs’ financial stability that would be better tailored to the purpose of the assessment of banks’ credit risks and to include these criteria in Regulation No.
1 A regional guarantee organisation is a legal entity whose core activity is to ensure small and medium-sized enterprises’ access to credit and other financial resources.
2 Bank of Russia Regulation No.
3 Financial stability of an RGO is assessed at the highest level.
4 Effectiveness of an RGO’s guarantee activity and operations is assessed at the highest level.
5 An RGO’s guarantee activity and operations are assessed as effective.
6 Financial stability of an RGO is assessed as low.
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05.04.2023 19.55.00