Central Bank expects raising provisions, risk ratios to stabilize consumer credit market
MOSCOW. Oct 18 (Interfax) - Raising loan loss provisions and risk ratios will be sufficient to cool off Russia's consumer credit market and slow its growth to 20-25% by the middle of 2014, the acting director of the Central Bank's financial stability department, Sergei Moiseyev said at a banking conference organized by Alfa Bank.
He said that these measures will result in "fairly rapid stabilization on the market."
The Central Bank has repeatedly voiced concerns about the excessive growth of unsecured consumer lending and the resulting growth of the debt burden on households.
The Central Bank plans to increase risk ratios (used in calculating capital) for unsecured consumer loans with high true interest cost (TIC) at the beginning of 2014. The regulatory risk ratio will go up to 600% from 200% as of January 1 for loans with annual TIC upwards of 60% in rubles; to 300% from 170% for loans with TIC of 45-60%; and to 160% from 140% for loans with TIC of 35-45%.
The Central Bank also plans to raise minimum provisions for unsecured loans on March 1, 2014 that will be applied beginning with financial statements as of April 1. Provisions for unsecured retail loans and loans grouped in portfolios of uniform loans that are not overdue are expected to increase to 3% from 2%. Provisions for loans overdue by up to 30 days will increase to 8% from 6%, and provisions for combined portfolios of uniform loans without overdue payments and with payments overdue by one to 30 days will increase to 5% from 3%.
