Bank of Russia approves additional measures aimed at supporting Russian citizens, economy and financial sector amid coronavirus pandemic

In addition to the earlier approved measures and in the pursuance of the instructions from the Russian President issued on 25 March 2020, the Bank of Russia has decided to implement a package of measures aimed at supporting the most vulnerable industries and retail borrowers facing a reduction in their incomes due to the pandemic, as well as a temporary easing of a range of regulatory requirements for financial institutions intended to maintain their capability to continue lending to the economy.

1. Measures to protect retail borrowers suffering from the pandemic

Due to the pandemic, many citizens, including individual entrepreneurs and self-employed persons, are facing a decrease in their incomes, which inevitably makes it challenging for them to properly fulfil their obligations to creditors.

1.1. In order to limit the negative impact of the pandemic on Russian citizens’ financial well-being in today’s situation, the Bank of Russia:

• Recommends that credit institutions, microfinance organisations, and credit consumer cooperatives promptly consider and approve applications from borrowers for debt restructuring due to an income reduction from 1 March 2020, which objectively makes it difficult for such borrowers to fulfil their loan obligations. In addition, creditors are recommended not to charge any increased interest, fines or penalties on borrowers in such cases;
• Allows credit institutions not to classify such loans as restructured ones for loss provisioning purposes until 30 September 2020, if the duration of overdue debt under the said loans did not exceed 30 days as of 1 March 2020;
• Allows microfinance organisations and credit consumer cooperatives not to categorise such loans as restructured ones until 30 September 2020, if the duration of overdue debt under these loans did not exceed 30 days as of 1 March 2020.

1.2. In order to prevent the deterioration of Russian citizens’ credit histories due to debt restructuring associated with the coronavirus outbreak, and to preserve all possibilities for such borrowers to raise loans in the future, the Bank of Russia:

• Will devise proposals on amending the Federal Law ‘On Credit Histories’ aimed at preventing the deterioration of borrowers’ credit histories and individual credit ratings due to debt restructuring because of the coronavirus spread during the period from 1 March 2020 through 30 September 2020;
• Before the introduction of relevant amendments to the Federal Law ‘On Credit Histories’, will recommend credit history bureaus not to record debt restructuring cases under such loans when forming citizens’ individual credit ratings.

2. Measures to support vulnerable industries

As the pandemic spreads, the number of industries experiencing hardships is growing. Some organisations have to limit their operations as part of the implementation of the measures aimed at containing the pandemic, which entails a material reduction in their incomes. In this regard, the Bank of Russia is taking action to support lending, including for paying wages to employees and decreasing the burden companies are experiencing to service the existing loans.

2.1. The Bank of Russia considers it reasonable to expand the earlier approved package of measures aimed at supporting lending to SMEs, transport and tourism sectors (including hotel business) to the following industries:  

• public catering;
• arts, sports and leisure, as well as entertainment services;
• conference and exhibition organising;
• educational services;
• lease-out of own or rented non-residential buildings and premises (exhibition halls, shopping and entertainment sites, non-food retail trade);
• non-food retail trade;
• dentistry.

Under loans extended to organisations of the above industries that were restructured due to the pandemic, the Bank of Russia allows creditors not to deteriorate their debt servicing quality assessments until 30 September 2020, regardless of the assessments of borrowers’ financial standing.

In addition, the Bank of Russia allows credit institutions until 30 September 2020 to make decisions not to downgrade their assessments of borrowers’ financial standing for loan loss provisioning purposes, if borrowers’ financial standing deteriorated after 1 March 2020 due to the spread of the coronavirus pandemic.

2.2. Foreign currency loans involve elevated risks, especially if borrowers lack income in foreign currency. Amid intensified volatility in the foreign exchange market, a range of borrowers may request their banks to change the currency of their loans to rubles, which will help reduce their credit exposure. In view of this, the Bank of Russia:

— Recommends that credit institutions promptly consider borrowers’ applications for debt restructuring, implying a change of the credit currency from a foreign currency to Russian rubles, during the period until 30 September 2020;

— Allows creditors not to downgrade their assessments of the debt servicing quality under such restructured loans and (or) of borrowers’ financial standing, performed as of 1 March 2020.

2.3. Based on the results of additional consultations with the banking and business community, and following the elaboration jointly with the Russian Government of the SME lending programme aimed at supporting wage payments, the Bank of Russia has decided to refine the parameters of the new facility supporting SME lending. As part of the earlier approved aggregate limit, up to 150 billion rubles will be allocated to support bank lending to SMEs to ensure the uninterrupted fulfilment of their obligation to pay wages to their staff.

3. Measures to improve the availability of online trade

As the coronavirus pandemic spreads, remote trade is becoming increasingly important for both households and businesses. In view of this, the Bank of Russia:

• Has decided to limit the maximum size of acquiring fees on online purchases and set their size below 1% for the period from 15 April through 30 September 2020 (at present, the acquiring fee averages 1.2–2.2% depending on the type of cards or the category of goods).

This will make it possible for individuals to make online purchases staying at home, and for trade and service companies (TSCs) — to offer everyday goods with home delivery.

Fees will be reduced for TSCs engaged in retail trade of food, medicines and other medical goods, clothes, and everyday goods. With regard to household appliances, electronics, and means of communication, this decrease will be applicable to purchases not exceeding 20,000 rubles.

4. Measures easing the regulation of liquidity of systemically important credit institutions

In the current situation, it is reasonable that systemically important credit institutions operate under the concessional regime of compliance with the N26 (N27) liquidity coverage ratio, so that they have more possibilities to credit the economy. In addition to the announced reduction from 0.5% to 0.15% in the fee for the right to use an irrevocable credit line, the Bank of Russia:

• Has raised the maximum aggregate limit under irrevocable credit lines from 1.5 to 5 trillion rubles for the period from 1 April 2020 through 31 March 2021;
• Has made the decision that until 30 September 2020 a reduction in the actual value of the N26 (N27) ratio shall not be deemed to be a violation of the N26 (N27) ratio, if this was caused by a shortage of highly liquid assets or other alternative instruments due to limited possibilities to extend or raise borrowings for more than 30 calendar days.

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