Bank of Russia approves additional measures to support lending and protect people’s interests

In addition to the measures taken earlier, the Bank of Russia has decided to implement a set of measures aimed at supporting credit institutions in order to preserve their potential for lending to the economy, as well as non-bank financial institutions to ensure their uninterrupted operation and protect the interests of consumers.

1. Measures to support mortgage lending

In the conditions of declining business activity, individual borrowers who find themselves in a difficult situation can take advantage of credit holidays, which allow postponing payments on loans for up to 6 months. On 1 April 2020, the relevant law was adopted by the State Duma. The Bank of Russia allowed banks not to increase reserves for borrowers whose financial situation deteriorated amid the pandemic, as well as for restructured loans. In addition to the foregoing, the following decisions have been made to support mortgage lending: 

• In order to compensate for potential losses incurred by credit institutions due to a temporary decrease in interest income and to support mortgage lending, the Bank of Russia, in line with its countercyclical approach to macroprudential policy, cancels add-ons to risk weights for mortgage loans issued before 1 April 2020. This measure will allow banks to absorb credit losses in excess of 100 billion rubles, eliminating negative consequences to ensure the compliance with capital adequacy ratios, and will contribute to mortgage lending growth.
• On an ongoing basis, a separate 5% limit will be established for the investment of pension savings in mortgage-backed loans. At the same time, such bonds will be excluded from the 10% limit for the investment in certain higher-risk assets. Similar changes will be applied to the new requirements for the investment of pension reserves.

2. Measures to maintain the potential for lending to SMEs

In order to provide additional aid to SMEs, the Bank of Russia has decided to ease the requirements for the minimum rating of credit institutions for their participation in the new mechanism of SME lending support. If credit institutions have at least one credit rating assigned to them—not below ‘A-(RU)’ according to the classification of the rating agency AKRA (JSC) or ‘ruA-’ according to the classification of the rating agency JSC Expert RA— the Bank of Russia will provide loans to them under the above mechanism without collateral (previously, the respective ratings were set at the levels ‘AA(RU)’ and ‘ruAA’). This will significantly expand the range of banks participating in the programme and will make it more accessible for small- and medium-sized enterprises.

This condition applies to all loans issued within the established aggregate limit of 500 billion rubles, including 150 billion rubles to ensure bank lending to SMEs to support and preserve employment in accordance with the rules approved by the Government of the Russian Federation. The Bank of Russia will provide loans to credit institutions at 4% p.a., which, combined with budget subsidies, will allow SMEs to receive loans to pay salaries at 0% p.a. for up to 6 months. 

3. Measures to provide liquidity to credit institutions

The Bank of Russia is constantly monitoring the liquidity situation in the banking sector. Currently, the banking sector is experiencing a structural liquidity surplus, and the supply of funds in the money market is adequate. However, as a result of loan repayment holidays extended to companies of the affected industries and individual borrowers, certain banks may face reduced cash inflows, increased unevenness in the distribution of liquidity and imbalances in access to medium- and long-term funding.

Therefore, the Bank of Russia will promptly expand the Lombard List and soften the requirements for the liquidity of securities used by credit institutions in their refinancing operations with the Bank of Russia, while maintaining the requirements for the credit quality.

If necessary, the Bank of Russia may resort to longer liquidity-provision instruments by resuming long-term repo auctions and auctions to provide long-term loans secured by receivables. These auctions, together with liquidity-absorbing operations, will help extend the term of funding in the banking sector and at the same time will not affect the capability of the Bank of Russia to achieve the operational goal of its monetary policy, i.e., the convergence of the money market rate with the key rate.

4. Measures to maintain the accessibility of insurance services

During the period of the measures aimed at preventing the spread of the coronavirus infection, individuals may encounter difficulties in dealing with insurance companies. In this regard, the Bank of Russia has developed recommendations for insurers to conduct their activity during the quarantine. In particular, it is recommended that insurers:

• publish information on their business hours and the possibility of remote operation on their websites; and
• execute compulsory motor third-party liability insurance (OSAGO) agreements without a diagnostic certificate, provided that such certificate is submitted to the insurer within one month of the date of lifting of the restrictive measures imposed by the authorities.

The restrictive measures taken may lead to an increase in loss settlement periods, and these circumstances will be taken into account by the Bank of Russia. At the same time, the Bank of Russia points out that it is essential that insurers take all measures necessary to protect the interests of insurance service consumers to the maximum extent possible.

5. Measures to support professional participants of the securities market and the trading and clearing infrastructureWith the coronavirus pandemic and the transfer of increasingly more employees of organisations that are professional participants of the securities market and the trading and clearing infrastructure to remote work, the process of fulfilling regulatory and supervisory requirements of the Bank of Russia is becoming more complicated. With that in mind, the Bank of Russia introduces temporary regulatory and supervisory relaxations for professional participants of the securities market and the trading and clearing infrastructure.

5.1. The Bank of Russia will not apply enforcement measures for the following actions (inaction) committed from 1 March 2020 to 1 January 2021:

• failure by brokers, dealers, management companies and joint-stock investment funds to provide information about over-the-counter trades to a trade organiser;
• incompliance by brokers with their obligation to calculate the liquidity coverage ratio and to submit the relevant reporting to the Bank of Russia;
• incompliance by dealers, brokers, managers and FX dealers with their obligation to calculate the capital adequacy ratio and to submit the relevant reporting to the Bank of Russia;
• submission by small and medium professional securities market participants of quarterly instead of monthly capital calculation reporting form;
• failure by the controller of a professional securities market participant to generate and submit to the director of the professional securities market participant a report on an identified violation (except for quarterly reports and reports on violations that require an immediate response);
• failure by the controller of a professional securities market participant to sign reporting forms submitted to the Bank of Russia in line with Ordinance No. 5117-U.

5.2. The Bank of Russia will not apply enforcement measures for the following actions (inaction) committed from 1 March 2020 to 1 March 2021:

• failure by trade organisers to conduct an operational audit (if an obligation to conduct such operational audit arises during the above-mentioned period);
• failure by trade organisers, clearing organisations and repositories to comply with software and hardware testing periods for less than six months (if the obligation to conduct such testing arises during the above-mentioned period).

6. Measures to support collective investment market participants

In order to support collective investment market participants and to limit the risk of a sell-off of financial assets at low prices, the Bank of Russia has made the following decision in addition to the measures taken earlier:

• to postpone for one year (until 1 July 2021) the deadline for lowering the concentration limits for the investment of pension savings of NPFs and UIFs;
• to postpone until 1 January 2021 the effective date of new requirements for the investment of pension reserves;
• to amend the Net Asset Valuation Rules, which will allow the state management company (VEB) and private management companies of the PFR that manage pension savings, as well as management companies of closed-end UIFs for qualified investors not to revaluate securities in respective portfolios temporarily (until 1 January 2021) during the period of increased volatility in the financial market.

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