Central Bank planning prohibitive FX home loan risk ratios from April 1
MOSCOW. Feb 12 (Interfax) - The Central Bank of Russia is proposing to raise risk ratios used to calculate capital adequacy from 150% to 300% for forex-denominated home loans issued after April 1, the Central Bank said in a draft instruction on the matter.
"The purpose of the draft is to stop banks from accumulating excessive risks in the FX home loan segment and to slow the rate at which FX home loans are issued," says an explanatory note to the draft.
Central Bank Governor Elvira Nabiullina said on January 30 that the Central Bank was prepared to raise the risk factors for foreign currency mortgages in order to make the mortgages "prohibitive" for banks, "The Russian Central Bank has already taken measures to discourage banks from issuing forex mortgages. Now it's 50% more expensive for banks to issue a forex mortgage than ruble-denominated one, as concerns capital. We are prepared to raise this coefficient event further in order for forex mortgages to be practically prohibitive," she said.
Support for borrowers who took out forex mortgages should only be provided with consideration given to their income. In the future, the Central Bank is prepared to take measure ensuring that forex mortgages become prohibitive for banks, Nabiullina said.
The Central Bank is not against legally banning forex mortgages, but the bank does not consider this a currency control measure, she said.
"We are not against this becoming a law. We'll look at what kind of law this will be. But we can do this with our own coefficients [risk ratios]," Nabiullina said, adding that these would restrict forex mortgages.
"But these are not foreign exchange controls. This is simply a ban on issuing foreign currency mortgages to the public. This isn't entirely forex control in the classical sense, but yes - it's a ban in light of the fact that people's lack of financial literacy makes them unable to assess future currency risks," she added.
Problems arose with paying off FX home loans at the end of last year when the ruble plummeted against the dollar and euro. The situation escalated with borrowers staging protests in Moscow and appealing to the authorities for help.
The home loans portfolio of Russian banks totaled 3.4 trillion rubles as of November 1, 2014. Only 3.5% or 117 billion rubles of this debt was forex-denominated. The share of overdue debt on the FX loans grew from 12.7% to 14.2% between January 1 and November 1.