Bank of Russia modifies risk assessment approaches to SME loans

The Bank of Russia Board of Directors has decided to increase the amount of loans, claims, and contingent credit liabilities (credit lines, bank guarantees, etc.) issued to small and medium-sized enterprises (SMEs) from ₽50 million to ₽100 million where banks may assess credit risk applying the internal ratings-based (IRB) approach without using official financial statements. The decision will take effect on 1 January 2025.

Given actual default rates on SME loans, the regulator has also increased the minimum amount of provisions to be made for the unsecured portfolios of homogeneous loans due subject to the IRB risk assessment from 2% to 4% and from 1% to 2% for other portfolios of homogeneous loans.

The decision is aimed at reducing the operational burden of credit institutions and promoting SME lending with sufficient credit risk coverage under a simplified model.

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