CBR to implement quantitative restrictions on consumer lending from 2023
MOSCOW. Sept 20 (Interfax) - The Central Bank of Russia (CBR), having seen the deteriorating quality of the consumer loan portfolio and the risks of increasing the population's debt burden, has returned to its plans to introduce macroprudential limits on unsecured consumer loans.
The Central Bank's plans for macroprudential policy are outlined in information and analytical materials on the regulator's website.
"At present, the quality of unsecured consumer loans is deteriorating against the background of the population's declining real incomes - the growth of restructuring is accompanied by an increase in unserviced debt (90+), as a result, by mid-2022 the share of problem debt (90+ and restructuring) has already exceeded 10% of the portfolio. The frequency of unsecured consumer loans first coming overdue has increased for most participants of the retail lending market," the CBR said in the materials.
To boost the attractiveness of loan products, many banks have launched marketing offers, such as loans for which the interest rate during the first months is at a minimum level, and then increases sharply (to attract borrowers who expect to be able to repay quickly).
As a result, in June and August 2022 the growth of the portfolio of unsecured consumer loans resumed (+0.2% in June, +0.7% in July and +1.8% in August). Against the background of the already implemented reduction of the key rate of the Bank of Russia, we can expect the market to move into a phase of steady growth as early as H2 2022, the CBR said.
According to the regulator, the vulnerability of the financial system to possible shocks may increase if the renewed growth of consumer lending is accompanied by a decline in lending standards (as was observed in the past). In the short term, banks consider consumer lending less risky than corporate lending, but in the long term the ability of citizens to repay loans is determined by the prospects of the economy (and, as a consequence, the dynamics of unemployment and real incomes of the population). If banks continue to increase consumer lending at a faster rate, the corporate sector will face a shortage of lending resources, economic growth will be lower, and credit quality (including consumer lending) will be worse. The situation is aggravated by the fact that the share of indebted borrowers, who are most vulnerable in case of financial difficulties, is growing.
"Therefore, in current conditions, when economic and lending cycles are unsynchronized, the relevance of macroprudential limits (MPL) increases - MPL will allow for quickly limiting the risks of a possible increase in the debt burden of the population. At the same time, this tool, unlike macroprudential buffers, allows for not diverting banks' capital, which will be required in the coming years for financing of structural transformation of the Russian economy," the regulator said.
The regulator planned to introduce MPL as early as July 1, 2022, but postponed these plans after the introduction of large-scale sanctions against Russia in March.