Moscow. 26 April. INTERFAX.RU – From July 1, 2024, the Bank of Russia will increase premiums on risk ratios for unsecured consumer loans and set premiums on car loans, the regulator said in a statement.
Taking into account the fact that banks are accumulating riskier loans in their portfolios, in order to increase the stability of the banking sector in a stress scenario and limit the debt burden of citizens on car loans, the Bank of Russia is increasing premiums on risk coefficients for unsecured consumer loans with a total loan cost (FLC) from 25% to 40% and establishes premiums for car loans with a debt burden of PDN of more than 50%.
The allowances will allow, by the end of 2024, to create a capital buffer of about 7% of the portfolio of unsecured consumer loans (4% as of April 1, 2024) and about 3% of the auto loan portfolio. An increase in markups will help reduce the share of risky loans and increase the stability of banks in the event of an increase in losses on such loans, the Central Bank notes.
The Central Bank draws attention to the acceleration of the growth rate of consumer loans to 1.8% in March from 0.9% in February and January. In the first quarter, debt on cash loans decreased by 1.5%, on credit cards – increased by 11%. In credit cards, the majority of debt (74%) is from cards issued to borrowers before the introduction of macroprudential limits.
The effect of macroprudential limits (MPL) is gradually improving the lending structure. The share of loans that banks provide to borrowers with an increased debt burden (PDN more than 50%) has decreased since the introduction of the MPL from 64% in the fourth quarter of 2022 to 34% in the first quarter of 2024. For cash loans, this share decreased from 67% to 25%, and for credit cards – from 59% to 43%. For credit cards, macroprudential limits apply with a delay, as they are applied when the credit limit on the card is increased or when a new credit card is issued, but do not limit the issuance of funds within previously approved limits.
Banks are gradually increasing rates on new loans in the face of rising market rates and the Bank of Russia temporarily lifting the restriction on the maximum size of the PIC until July 1, 2024. The weighted average value of PSC for cash loans increased from 20.3% in the third quarter of 2023 to 26.4% in the first quarter of 2024. The growth was mainly due to an increase in the share of loans with a PSC over 25%: from 16% in the third quarter of 2023 to 50% in the first quarter of 2024.
“Although the increase in the PIC reflects the rise in the cost of funds raised on the market (the increase in the key rate for this period was 7.5 percentage points), early indicators of credit quality indicate that loans provided from the third quarter of 2023 are characterized by a noticeably higher level of risk The share of cash loans overdue by more than 30 days in the third month from the date of loan issue increased from 0.4% for loans provided in July 2023 to 1.2% for loans provided in January 2024 (0.7% for loans). loans provided in October 2023),” the Central Bank notes.
According to the regulator, loans at higher rates are taken out by borrowers with a higher level of risk, while more solvent citizens postpone the decision to receive a loan. Banks soften their requirements by lending to riskier citizens and compensating for the increased risk with a high level of PIC.
There is no deterioration in the quality of debt servicing for credit cards, since most of the debt is formed by cards issued before 2023. However, the risk level of credit cards is generally higher than that of cash loans. The share of debt overdue by more than 30 days in the third month from the date of issuance of credit card funds in January 2024 amounted to 2.0%. Given the accelerated growth of credit card debt, this also creates the preconditions for the accumulation of riskier loans in banks’ loan portfolios.
Auto lending is growing at a high rate, with debt growth amounting to 53% YoY as of April 1, 2024. It is ensured, among other things, by the weakening of lending standards by banks. The share of loans with a personal income tax of more than 50% accounted for 61% of issuances in the first quarter of 2024 (50% in the first quarter of 2023, 44% in the first quarter of 2022), the Central Bank notes.
Tags: Central Bank Russian Federation tighten regulation consumer loans car loans July
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