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Report: Russian regulator ups risk ratios to curb consumer lending

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Report: Russian regulator ups risk ratios to curb consumer lending

The Russian central bank decided to introduce higher risk ratios for unsecured consumer loans with high interest rates, citing accelerated growth in this segment, Kommersant reported March 7.

The regulator intends to introduce a risk ratio of 1.1 for unsecured consumer loans with an annual percentage rate of between 15% and 20%, while a risk ratio of 1.2 will apply to loans with an APR of between 20% and 25%. The ratios will adhere to loans issued after May 1.

The need for tougher regulation is associated with accelerating lending activity in the Russian consumer lending segment. For the 12 months until Feb. 1, loan obligations increased by 12.6%, while their average monthly growth in November and December 2017 as well as January 2018 stood at 19%, the newspaper noted, citing central bank data. The regulator also believes that the debt burden has been growing disproportionately compared to the income of retail borrowers and is relatively high, especially when it comes to unsecured lending.

The introduction of the new ratios as of May will give local consumer lenders enough time to review their product lines and focus on less risky loans at lower rates, Kommersant said, quoting local analysts. By adjusting their business, banks will be able to maintain capital adequacy ratios and their client base, but the changes could negatively affect their net interest margins, the newspaper noted.