News

Bank of Russia adjusts value of add-ons on unsecured consumer loans due to changes to procedure for calculating total cost of credit

29 January 2024

Press release

With regard to the enactment of changes¹ to the procedure for calculating the total cost of credit (TCC)² from 21 January 2024, the Bank of Russia conducted a survey of the 24 largest banks in the retail lending market and revised risk-weight add-ons for unsecured consumer loans depending on the TCC.

According to the survey, the new procedure for calculating the TCC will impact on cash loans only moderately. In the credit card segment,³ it will lead to a more noticeable increase in the average market value of the TCC due to the fees for cash withdrawals and transfers⁴ incorporated into the TCC. However, the impact of these changes will be extended over time, since the new procedure will mainly influence credit cards issued after 21 January 2024.⁵ According to the Bank of Russia's estimates, the share of such credit cards in the total increase of outstanding amounts on unsecured consumer loans in 2024 Q1 will be 5%. Additionally, the revision of the TCC will not affect all its ranges, as banks are adjusting the conditions for credit cards.

Since the growth of the TCC is due to changes not in the risk profile of borrowers, but in the procedure for calculating TCC,⁶the Bank of Russia introduces an additional TCC range of 35–40% in the matrix of risk-weight add-ons from 1 April 2024,⁷ in order to maintain the risk sensitivity of macroprudential add-ons. In the 35–40% range of the TCC, risk-weight add-ons will be reduced to the values currently established for the 30–35% range. In the over 40% range of the TCC, the prohibitive add-ons will be retained at the level which is currently established for loans with the TCC exceeding 35% (the value of the add-on is 5.0).

Risk-weight add-ons for consumer loans provided from 1 April 2024

Add-on		DSTI range,⁸ %
Add-on		No DSTI	(0–30]	(30–40]	(40–50]	(50–60]	(60–70]	(70–80]	Above 80, DSTI has not been calculated
TCC range, % p.a.	(0–10]	0.2	n/a	n/a	n/a	0.2	0.5	1.0	1.5
	(10–15]	0.3	n/a	n/a	n/a	0.3	0.6	1.1	1.6
	(15–20]	0.7	n/a	n/a	n/a	0.7	1.1	1.5	2.0
	(20–25]	1.1	n/a	n/a	n/a	1.1	1.5	1.9	2.4
	(25–30]	1.6	0.5	0.6	0.8	1.6	1.9	2.3	2.6
	(30–35]	2.7	1.5	1.8	2.0	2.7	2.9	3.1	3.4
	(35–40]	2.7	1.5	1.8	2.0	2.7	2.9	3.1	3.4
	40+	5.0	5.0	5.0	5.0	5.0	5.0	5.0	5.0

Based on actual data for 2024 Q1, the need of an additional revision of the matrix of TCC add-ons will be analysed.

¹ Stipulated by Federal Law No. 359-FZ, dated 24 July 2023, ‘On Amending the Federal Law ‘On Сonsumer Loans’ and Certain Laws of the Russian Federation’.

² TCC is total cost of consumer loan.

³ And other electronic means of payment (EMP).

⁴ To apply add-ons to the risk weights of credit cards, the maximum possible TCC is used in accordance with Appendix 7 to Bank of Russia Ordinance No. 6411-U, dated 17 April 2023.

⁵ As well as credit cards and other EMPs issued before 21 January 2024, in cases in which the lender is required by law to recalculate the value of the TCC, for instance, an increase in the interest rate.

⁶ This change will not affect the real cost of credit, since borrowers already bear these costs, but the latter will now be incorporated in the TCC.

⁷ Credit claims, as well as, claims for interest on loans provided to individuals in rubles for consumer purposes (hereinafter referred to as consumer loans).

⁸ Debt service-to-income ratio of a borrower.

The reference to the Press Service is mandatory if you intend to use this material.

Save as PDF