Bank of Russia raises macroprudential add-ons for unsecured consumer loans
From 1 September 2024, the Bank of Russia will raise the risk-weight add-ons for unsecured consumer loans. The measure is to limit the growth in households’ debt burden and build up banks’ macroprudential capital buffer.
In making this decision, the Bank of Russia Board of Directors was guided by the following.
The rise in outstanding unsecured consumer loans had been accelerating (the growth rate was 2.0% in May and 1.8% in April and March).1 The annual growth rates of outstanding loans reached 18.1% as of 1 June 2024 (20% in annualised terms),2 which substantially outstrips the increase in households’ incomes (+14.2% in 2024 Q1 vs 2023 Q1) and is pushing up households’ debt burden levels.
At present, the assessment of borrowers’ annual incomes includes significant bonuses and other one-off payments made by employers to individuals in February—March 2024. This surge in incomes may be temporary. However, it might be a reason why a borrower’s debt service-to-income ratio (DSTI) can be underestimated. As a result, loans are included in segments with lower DSTI that are not subject to macroprudential limits and borrowers may thus raise more loans. Such borrowers may be vulnerable if their irregular incomes lower in the future, which is why these loans involve elevated risks. Therefore, the Bank of Russia raises the add-ons, including for loans with low DSTI and a low effective interest rate (EIR), except for lowest-risk loans.
Lending on credit cards issued earlier had been soaring. The macroprudential limits have a time-lagged effect on such cards since they apply when a credit limit is increased or when a new card is issued, but do not restrict lending within the limits approved before. In 2024 Q1, credit card loans accounted for 22% of the loans issued to borrowers with DSTI above 80%. Higher macroprudential add-ons will make such loans less attractive to banks.
The measures taken will also help speed up the accumulation of the macroprudential capital buffer which accounted for 4.3% of the portfolio of unsecured consumer loans (₽0.6 trillion) as of 1 June 2024.
Table 1. Risk-weight add-ons for consumer loans issued from 1 July 2024
| Add-on | DSTI, % | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| No DSTI | (0; 30] | (30; 40] | (40; 50] | (50; 60] | (60; 70] | (70; 80] | (80+)3 | ||
| EIR, % p.a. | (0; 10] | 1.5 | n/a | n/a | n/a | 0.2 | 0.5 | 1.0 | 1.5 |
| (10; 15] | 1.6 | n/a | n/a | n/a | 0.3 | 0.6 | 1.1 | 1.6 | |
| (15; 20] | 2.0 | n/a | n/a | n/a | 0.7 | 1.1 | 1.5 | 2.0 | |
| (20; 25] | 2.4 | n/a | n/a | n/a | 1.1 | 1.5 | 1.9 | 2.4 | |
| (25; 30] | 3.5 | 1.0 | 1.3 | 1.5 | 2.0 | 2.5 | 3.0 | 3.5 | |
| (30; 35] | 4.0 | 2.0 | 2.3 | 2.6 | 3.0 | 3.3 | 3.7 | 4.0 | |
| (35; 40] | 4.5 | 3.0 | 3.2 | 3.6 | 4.0 | 4.2 | 4.4 | 4.5 | |
| (40+) | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | |
Table 2. Risk-weight add-ons for consumer loans issued from 1 September 2024
| Add-on | DSTI, % | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| No DSTI | (0; 30] | (30; 40] | (40; 50] | (50; 60] | (60; 70] | (70; 80] | (80+)4 | ||
| EIR, % p.a. | (0; 10] | 1.8 | 0.0 | 0.0 | 0.2 | 0.3 | 0.7 | 1.2 | 1.8 |
| (10; 15] | 2.0 | 0.0 | 0.2 | 0.3 | 0.5 | 0.9 | 1.4 | 2.0 | |
| (15; 20] | 2.4 | 0.4 | 0.5 | 0.7 | 0.9 | 1.3 | 1.8 | 2.4 | |
| (20; 25] | 2.9 | 1.0 | 1.2 | 1.4 | 1.7 | 2.0 | 2.3 | 2.9 | |
| (25; 30] | 3.6 | 1.6 | 1.7 | 1.9 | 2.2 | 2.6 | 3.0 | 3.6 | |
| (30; 35] | 4.5 | 2.4 | 2.6 | 2.8 | 3.1 | 3.5 | 3.9 | 4.5 | |
| (35; 40] | 5.5 | 3.3 | 3.5 | 3.8 | 4.1 | 4.5 | 4.9 | 5.5 | |
| (40+) | 6.0 | 6.0 | 6.0 | 6.0 | 6.0 | 6.0 | 6.0 | 6.0 | |
1 According to Reporting Form 0409115.
2 Seasonally adjusted.
3 Including loans, for which no mandatory DSTI calculation was made.
4 Including loans, for which no mandatory DSTI calculation was made.
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