The Central Bank wants to establish a protective risk ratio for retailForex, creditors wants to establish prohibitive risk weights for retail foreign currency loans
The Bank of Russia intends to raise up to a 300% risk weight for foreign currency loans granted to natural persons from 1 July of the current year. This is stated in the draft guidance, posted on the website of the regulator.
"This "protective" measure is intended to prevent the accumulation of excessive risks by banks in the segment of foreign currency lending and reflect the real level of risk on credit products are not subject to a similar requirement in the current regulation," reads the explanatory note to the document. The regulator is also proposing to increase from one year to two years the period during which the credit institution is entitled to exclude from the portfolio of homogeneous loans loans to those borrowers whose financial situation has deteriorated because of an emergency.
In addition, the Central Bank proposes to consider the presence of mortgage insurance as a risk reduction for the mortgage loans in the calculation of standards and the formation of reserves for possible losses. Projects 1 and 2 is that in calculating the LTV (the ratio of the amount of the loan requested to the value of the property provided as collateral. — Approx. ed.), the value of the principal debt is reduced by the amount of the sum insured under the insurance contract of liability of the borrower or the contract of insurance of financial risk of the creditor", — stated in the explanatory Memorandum.
Projects instructions modify the instructions of the Central Bank "On required ratios of banks" and the position of the Central Bank "On the procedure of formation by credit organizations of reserves for possible losses on loans, loan and similar debt".
In early March, the Bank of Russia doubled from 150% to 300% — increased risk weights for mortgage loans in foreign currency. The new ratio applies only to mortgage loans that will be issued after April 1. Risk coefficient banks are used for the calculation of capital adequacy ratio, accordingly, a high ratio will pressure capital as the Bank will need more capital to comply with the standard.
About the readiness of the Central Bank to raise the risk weights for foreign currency mortgage loans the Bank of Russia Elvira Nabiullina said at the end of January. "Now banks and a half times more expensive from the point of view of capital to issue currency mortgages than the ruble. We this coefficient is willing to do the above to actually exchange the mortgage was prohibitive," said Nabiullina, speaking at the government hour in the state Duma.
"This "protective" measure is intended to prevent the accumulation of excessive risks by banks in the segment of foreign currency lending and reflect the real level of risk on credit products are not subject to a similar requirement in the current regulation," reads the explanatory note to the document. The regulator is also proposing to increase from one year to two years the period during which the credit institution is entitled to exclude from the portfolio of homogeneous loans loans to those borrowers whose financial situation has deteriorated because of an emergency.
In addition, the Central Bank proposes to consider the presence of mortgage insurance as a risk reduction for the mortgage loans in the calculation of standards and the formation of reserves for possible losses. Projects 1 and 2 is that in calculating the LTV (the ratio of the amount of the loan requested to the value of the property provided as collateral. — Approx. ed.), the value of the principal debt is reduced by the amount of the sum insured under the insurance contract of liability of the borrower or the contract of insurance of financial risk of the creditor", — stated in the explanatory Memorandum.
Projects instructions modify the instructions of the Central Bank "On required ratios of banks" and the position of the Central Bank "On the procedure of formation by credit organizations of reserves for possible losses on loans, loan and similar debt".
In early March, the Bank of Russia doubled from 150% to 300% — increased risk weights for mortgage loans in foreign currency. The new ratio applies only to mortgage loans that will be issued after April 1. Risk coefficient banks are used for the calculation of capital adequacy ratio, accordingly, a high ratio will pressure capital as the Bank will need more capital to comply with the standard.
About the readiness of the Central Bank to raise the risk weights for foreign currency mortgage loans the Bank of Russia Elvira Nabiullina said at the end of January. "Now banks and a half times more expensive from the point of view of capital to issue currency mortgages than the ruble. We this coefficient is willing to do the above to actually exchange the mortgage was prohibitive," said Nabiullina, speaking at the government hour in the state Duma.
