Bank of Russia’s decisions on macroprudential add-ons for mortgage loans and loans to large over-indebted companies

1. Effective from 1 March 2025, the Bank of Russia is going to decrease risk-weight add-ons for mortgage loans.

Earlier measures taken by the Bank of Russia to tighten macroprudential policy¹ helped reduce mortgage lending risks in 2024. Loans issued to borrowers with the debt service-to-income ratio (DSTI) exceeding 80% accounted for 13% of total new mortgage loans in 2024 Q4 (vs 45% in 2023 H2). The proportion of high-risk loans with a low down payment (below 20%) also dropped from 50% in 2023 H2 to 13% in 2024 Q4.

On 1 January 2025, the Standard for Protecting the Rights and Legitimate Interests of Mortgage Borrowers came into force. The document aims to counter unfair practices in mortgage lending related to overpriced housing.

Taking into account the easing of imbalances in the housing market, the Bank of Russia is going to reduce from 1 March 2025 risk-weight add-ons for mortgage loans with a down payment of over 20% issued to borrowers with DSTI below 70%. In riskier segments, add-ons will remain unchanged. From 1 July 2025, the Bank of Russia will begin to use macroprudential limits to mitigate risks in these segments and will possibly revise the values of add-ons. 

Risk-weight add-ons for mortgage loans issued from 1 March 2025 and secured by claims under shared construction agreements

For reference: risk-weight add-ons for mortgage loans issued from 1 March 2024 and secured by claims under shared construction agreements

Risk-weight add-ons for mortgage loans issued from 1 March 2025 and secured by residential real estate

 For reference: risk-weight add-ons for mortgage loans issued from 1 March 2024 and secured by residential real estate

The decrease in add-ons will not significantly slow down the accumulation by banks of the macroprudential capital buffer for mortgage portfolios. As of 1 January 2025, it accounted for 1.6% of the debt on mortgage loans excluding loan loss provisions. According to the Bank of Russia’s estimates, a 2% buffer will be sufficient to cover losses on mortgage loans if the risk scenario materialises.

2. Effective from 1 April 2025, the Bank of Russia is going to set the risk-weight add-on at 20% for the increase in credit claims on large over-indebted companies.

In 2024, the corporate loan portfolio was up by 17.9%. About 20 major companies accounted for 25% of this growth, while the debt burden for some of them increased significantly. There are risks of a further rise in the debt of large highly leveraged companies with relatively weak debt indicators. In view of this, from 1 April 2025, the Bank of Russia is going to set a 20% macroprudential add-on for the increase in banks’ ruble or foreign currency claims on large highly leveraged companies.

This add-on level (20%) will allow banks to gradually adapt to the new regulation and will not significantly influence lending. However, it will encourage banks to assess the risks of over-indebted companies more carefully. The new add-on will also make it possible to accumulate capital buffers on corporate loans. Since the add-on will apply exclusively to large credit claims (on borrowers that are part of groups of related borrowers whose debt to a bank exceeds ₽50 billion and 2% of the bank’s equity (capital) that are made only by large creditors, this add-on may encourage companies to apply for loans to other banks more actively, which will help reduce the credit risk concentration in the banking sector.

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