The Central Bank of the Russian Federation is planning a new approach to assessing the collateral pledged against loans to encourage local banks to focus more on the quality of loans and borrowers, rather than the collateral itself.
A planned overhaul, announced by the regulator March 13, will also address the problem of the illegal withdrawal of assets including property and securities accepted by lenders as collateral, the central bank noted. The proposed measures are aimed at improving market discipline among local financial institutions and will be introduced gradually.
The first stage of the reform will see the introduction of new rules on setting aside loan loss provisions on collateralized loans. Next, three to five years into the reform, the regulator will ban banks from introducing changes into or terminating collateral agreements.
The proposals have been put up for consultation with local market participants.
