In the context of the coronavirus pandemic and a sharp drop in oil prices, the Bank of Russia has decided to implement a package of measures to help the financial sector maintain its capability to provide resources to the economy, to protect the interests of those who have suffered from the pandemic, to maintain the availability of payment services for the people and to help the financial sector adapt to the anti-epidemic restrictions.
1. Measures aimed at protecting those who have suffered from the pandemic and ensuring the availability of payment services for the people
The developments related to the coronavirus pandemic spread require supporting financial consumers and mitigating risks for their financial well-being. The Bank of Russia:
- recommends that credit institutions, microfinance organisations and consumer credit cooperatives restructure debt, and refrain from applying penalties and fines on loans to individual borrowers if they submit an application and an official confirmation of being infected with a coronavirus;
- entitles credit institutions not to recognise such loans as restructured for the purpose of creating reserves and not to apply macroprudential add-ons to such loans until 30 September 2020;
- entitles microfinance organisations not to recognise such loans as restructured and not to apply to them adjustment ratios for claims to borrowers whose debt to income (DTI) ratio exceeds 50% when calculating the capital adequacy ratio until the end of 2020;
- entitles credit institutions not to increase reserves on loans to individual borrowers in the case of worsening of their financial standing and/or debt servicing quality if there is an official confirmation of them being infected with a coronavirus, until 30 September 2020;
- recommends that credit institutions and microfinance organisations do not foreclose the pledged real estate property if individual borrowers fail to perform their obligations under the loan agreement and if they submit an application and an official confirmation of being infected with a coronavirus, until 30 September 2020;
- recommends that insurance organisations fulfil policy holders’ applications to extend the term for settling insurance events and the term of payment under voluntary insurance agreements and that insurance organisations do not charge any penalties or fines or other consequences for policy holders’ failure to duly perform their obligations under a voluntary insurance agreement, if they submit an application and an official confirmation of being infected with a coronavirus.
In order to ensure the opportunity for citizens to make smooth online transfers between individuals, the Bank of Russia sets the following limits for banks’ fees on such transfers effective from 1 May 2020:
- Faster Payments System (FPS) transfers for up to 100,000 rubles per month shall be performed at no charge;
- FPS transfers for over 100,000 rubles per month shall be subject to a fee not exceeding 0.5% of the payment amount but no more than 1,500 rubles.
In order to ensure the opportunity for customers to make smooth online payments for food and medical goods without the need to visit shops and in order to support online retail, the Bank of Russia is considering the possibility to set limits for acquiring fees on card payments for online purchases.
2. Measures to support lending to small and medium-sized enterprises
Small and medium-sized enterprises are among the most vulnerable economic sectors stricken by the pandemic. The Bank of Russia’s refinancing programme will combine with regulatory relaxations to ensure that businesses retain access to bank lending as the pandemic is pushing business revenues down.
- The Bank of Russia is expanding its refinancing programme for small and medium-sized enterprises (SME). In addition to the tool designed to implement interest rate curbs, a new lending facility will be in place with a refinancing limit of 500 billion rubles, with a view to shoring up SME lending. Effective from 23 March 2020, the Bank of Russia lending rate on both facilities is 4%.
For loans being refinanced under the previous limit of 175 billion rubles, the Bank of Russia lending rate has been reduced from 6% to 4%. The effective interest rate will be within 8.5%. No sectoral curbs on SME lending will be in place.
Beginning in April 2020, beyond the currently operational limit of 175 billion rubles, an additional funding of 500 billion rubles will be available, in an effort to sustain and boost growth in bank lending to SMEs. Within the scope of this additional credit limit, the Bank of Russia intends to provide to credit institutions one-year loans at the rate 4% per annum. Unsecured loans will be made available to highly rated credit institutions1; other lenders will be able to receive them on the condition that such loans are guaranteed by JSC RSMB Corporation.
The programme is open to banks whose ruble SME loan portfolios are equal to at least 95% of their respective portfolios of 1 March 2020. The Bank of Russia will specify a maximum amount of funding for each credit institution, calculating it as the difference between the volume of the bank’s ruble SME loan portfolio as of the first day of a current month and that of this same portfolio as of 1 March 2020, reduced by 5%. Should the bank’s ruble SME loan portfolio as of the first day of a current month total less than 95% of its volume as of 1 March 2020, the funds the credit institution borrows from the Bank of Russia under this facility are subject to early repayment. Loans within the additional limit will be issued through 30 September 2020.
- The following options are open to credit institutions and microfinance organisations thanks to these Bank of Russia decisions:
- the opportunity, through 30 September 2020, to sustain the quality of debt servicing under restructured loans regardless the assessment of the financial position of a borrower — an SME entity;
- the opportunity, through 30 September 2020, to make a decision confirming a non-deteriorated assessment of a financial position of a borrower — an SME entity, for making loss provisions.
- The Bank of Russia recommends that credit institutions, microfinance organisations and consumer credit cooperatives consider debt restructuring under their outstanding loans as a high priority measure to prevent SME entities from accumulating overdue debt, or to settle such debt, in cases relevant applications from SME entities are submitted, through 30 September 2020.
3. Measures to support mortgage lending
In order to support the availability of mortgage lending in an environment when banks are suspending loan rate reductions, the Bank of Russia:
- has reduced add-ons to risk weights on mortgage loans and loans under equity construction contracts to be issued from 1 April 2020, according to the following table:
Table. Add-ons to risk weights on ruble mortgage loans to be issued from 1 April 2020
|Add-on, pp||Debt to income ratio, %|
|Not calculated||(0; 30]||(30; 40]||(40; 50]||(50; 60]||(60; 70]||(70; 80]||80+|
|Mortgage loan principal to the fair value of collateral (loan to collateral ratio).||(80; 85]||50||20||30||40||50||60||70||80|
|85 / 90||100||100||100||100||100||100||100||100|
- has made changes have been made to the procedure for applying add-ons for loans with low down payments. For mortgage loans with low down payments (up to 10%) repaid out of maternity capital, extra add-ons to risk weights will decrease as loans are repaid, which is set to enhance access to mortgage loans for families with children.
- has expanded the Lombard List to include a number of mortgage bonds which are of appropriate credit quality and meet other statutory requirements.
4. Measures to support the financial sector’s ability to provide resources to the economy
Changing external conditions and pressure on internal demand, exerted by the pandemic, may reduce the availability of financial resources to the real economy. To support lending, the Bank of Russia:
- entitles credit institutions and non-bank financial institutions, which apply Bank of Russia regulations to their accounting procedures, to recognise equity and debt securities, acquired before 1 March 2020, at fair value in the accounting records; and to recognise debt securities, acquired from 1 March 2020 through 30 September 2020, at fair value as of the acquisition date. These measures will be effective until 1 January 2021;
- offers easier conditions for providing irrevocable credit lines in accordance with the liquidity coverage ratio N26 (N27) until 1 April 2021. The irrevocable credit line fee will be reduced from 0.5 to 0.15%. Also, the limit for irrevocable credit line will be calculated in line with the new procedure, offering more opportunities for systemically important credit institutions (SICIs) to manage their liquidity amid elevated volatility;
- allows credit institutions to include operations in six foreign currencies (US dollar, Pound sterling, Swiss franc, Japanese yen, and Chinese yuan) into their required ratios calculations (excluding calculations of the values (limits) of open currency positions) at the official exchange rate of the respective currency, set by the Bank of Russia as of 1 March 2020 for the period from 1 March 2020 through 30 September 2020 inclusive;
- retains the national countercyclical capital buffer at zero per cent;
- allows non-governmental pension funds not to bring pension savings and pension reserves portfolios in line with stress testing requirements until 1 January 2021;
- allows non-governmental pension funds and managing companies not to ensure compliance of their portfolios with the current structural limitations in case of violations due to market factors until 1 January 2021.
Please note that in addition to the aforementioned possibilities, credit institutions can use buffers to the capital adequacy requirements (capital conservation buffer and systemic importance capital buffer), provided that they comply with the set limits for the share of profits to be distributed in accordance with the buffers’ size, including dividend payouts and compensations (incentives) to be paid to management.
The Bank of Russia assumes that financial institutions should make use of the specified regulatory easing not for the payment of bonus to management, but for supporting lending to the economy. Therefore, according to Bank of Russia recommendations, financial institutions using one or several types of the mentioned regulatory easing shall increase
- The Bank of Russia decided to postpone several amendments to the regulation of credit institutions, namely:
- to postpone the beginning of the application of rules on the provisioning for M&A transactions till 30 September 2020;
- to postpone the effective date of the large exposures concentration ratio (N30) till 1 January 2022;
- to delay the consideration of issue on differentiated systemic importance capital buffers to capital adequacy ratios of SIFIs to 2021;
- to delay the deadline for submitting information on the organisation of the Internal Capital Adequacy Assessment Process (ICAAP) and its results as of 1 January 2020 conducted on an individual and consolidated basis to 30 September 2020.
5. Measures aimed at easing regulatory and supervisory burden for financial institutions
Given the changes in the organisation of work in financial institutions, introduction of the remote working regime for the majority of staff, the Bank of Russia believes it necessary to alleviate the regulatory and supervisory burden, to limit, in the first place, the number of activities requiring the personal presence of employees in offices, to move forward deadlines for submitting reporting, and to reduce the number of non-urgent enquiries to financial institutions. The Bank of Russia:
- suspends examinations of credit institutions and NFOs (excluding cases requiring an immediate response), moves the time of its scheduled examinations over to the period after 1 July 2020;
- suspends the conduct of contact-based measures in the sphere of preventive conduct supervision (excluding cases requiring an immediate response) till the period of time after 1 July 2020;
- extends the deadline set for the execution of supervisory orders and enquiries up to one month in addition to the standard period of time (excluding cases requiring an immediate response);
- will refrain from the application of measures against financial institutions in what concerns the requirements of Bank of Russia regulations on ensuring the protection of banking information in the course of organising the remote working regime for the employees of financial institutions;
- limits the application of administrative sanctions primarily for the non-observance of reporting submission deadlines, violation of corporate legislation, and violation of legislation on credit history bureaus. It is implied that previously initiated cases on administrative violations will be considered with due regard to the epidemic situation and the possible reducing of administrative burden;
- for the period till 1 July 2020, it will extend the deadline for the submission to repositories of information on agreements as required by Ordinance No.
4104-Ufrom 3 to 6 business days from the date of their conclusion;
- will determine the list of reporting forms for which credit institutions and NFOs will not be subject to sanctions for the violation of the procedure on the submission of statements for the reporting periods from January through June 2020 (to be extended if need be). According to the Bank of Russia Survey Programme for 2020 H1, the collection of statistical and other information from credit institutions and NFOs will be reduced;
- amends the Operating Rules of the Bank of Russia Payment System (BRPS), providing for the extension of the BRPS operation by 1 hour.
6. Measures aimed at easing burden for Russian joint-stock companies
The Bank of Russia has drafted proposals to amend the corporate legislation. These amendments will help the requirements for deadlines and forms of information disclosure, for corporate actions to adapt to the current situation and to ensure the needed level of protection for the interests of shareholders. In particular, joint-stock companies will be allowed the following:
- to extend the period of time for conducting corporate procedures;
- not to record 2020 financial performance results of joint-stock companies showing their net assets value to equity capital ratio;
- to conduct the on-exchange buy-back of their shares in 2020 on the basis of a simplified procedure;
- to comply with the requirement on the disclosure of 2020 annual and interim consolidated financial reporting and other information by issuers at a later deadline;
- to comply with the requirement for public companies on the creation of audit committees for supervisory boards and of the internal audit systems by 1 January 2021 (currently, by 1 July 2020).
1 Credit institutions which have at least one credit rating assigned by one of the credit rating agencies, being not lower than the AA(RU) in the classification of the credit rating agency ACRA (JSC) or ruAA in the classification of the credit rating agency JSC Expert RA.
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