Loans went over the limits - Kommersant
The Central Bank's new approach to limiting high-risk retail lending has yielded results: in the first quarter, the share of loans from borrowers overburdened with debts fell by 7.1 percentage points at once, to 28.9%. At the same time, 11 banks failed to meet the new requirements - their loans to borrowers exceeded the limits of the Central Bank. In the future, the new standard of the Central Bank may contribute to the withdrawal of indebted borrowers from large banks, where they will be denied new loans, to banks with not the strongest risk management, experts say.
The new limit for banks, which quantitatively limits the issuance of risky loans (macroprudential limit, MPL), was violated by 11 Russian banks in the first quarter of 2023. This is stated in the review of the financial stability of the Bank of Russia published on May 26. Such an instrument first came into effect since the beginning of this year, and banks were required to comply with it on a quarterly basis.
According to the decision of the Central Bank, for banks with a universal license, the share of the volume of issuance of unsecured loans to borrowers with a debt burden ratio (LL) of more than 80% per quarter is limited to 25%. PTI shows what proportion of the average monthly income of the borrower goes to repay debts. For MFIs, the share is limited to 35%. Also, for consumer loans for a period of five years, banks have a limit of 10%. In the second quarter of 2023, the size of the limit will not change, but in the third quarter they were reduced for all positions by 5 p.p.
According to Alexander Shornikov, Director of the Retail Risks Department at Zenit Bank, the reason for the violation of the limit may be related to the complexity of calculating personal income tax. The banks that violated the limit probably did not have time to establish an early warning and response system, admits Alexei Ashurkov, Senior Vice President, Director of the Risk Management Department at Renaissance Credit Bank. For example, in order to see the risks of breaking through the limits, the bank must be able to calculate the MPL not only at the end of the quarter, but throughout the entire quarter. According to the head of the financial analytics center of Sberbank, Mikhail Matovnikov, the reason why some banks could go beyond the established limit may be due to their lagging behind in the digitalization of management business processes.
Most banks have managed to restructure lending processes and meet the limit, including by reducing the size of the loan offered. At the same time, the new instrument led to the redistribution of borrowers between banks. The new limit had a greater impact on banks with soft lending standards, a number of such players had to reduce issuance, the Central Bank notes. In the five largest banks with a historically high share of loans to indebted borrowers, the portfolio of consumer loans for the past quarter decreased by 1%, while in other banks it grew by more than 3%, the regulator notes.
If the situation in terms of demand and the economy had remained more depressed, then the consequences of the IPL in terms of extraditions “would have been more dramatic,” Mikhail Matovnikov believes. According to him, the effects of the new regulation were mitigated by a rapid recovery in demand in the economy. “Now a large volume of high-quality borrowers comes to banks, so the aggregate demand has not subsided,” he explains.
According to Mr. Ashurkov, the tightening of limits in the third quarter may lead to the fact that large banks with high risk management standards "will be forced to refuse more often or offer a number of clients lower limits." He does not rule out that the unsatisfied demand for loans will shift towards players with not the strongest risk management.
So far, the regulator has applied two measures to the offending banks. The first is a significant increase in the risk weight for the share of loans that exceeds the standard, up to 1250% (the size of the loan will be multiplied by this volume when calculating capital adequacy.— "b"), said Ksenia Yudaeva, First Deputy Chairman of the Central Bank, at a press conference. The second measure is that the limit for the next quarter is reduced by the amount of excess.
In case of a systematic violation, the Central Bank may take other measures, for example, a fine of up to 0.1% of the minimum authorized capital, as well as a restriction on operations for up to six months. For the bank, increased risk ratios will negatively affect the values of capital adequacy ratios, notes Roman Kenigsberg, Head of the FBK Internal Audit and Risk Management Department.
According to the results of the first period of the new prudential measure, the Central Bank recognizes the results as favorable: the share of unsecured loans with PTI over 80% in the first quarter was 28.9% against 36% a quarter earlier. The share of cash loans extended for more than five years fell to 6.7% (according to bank statements) against 19% (according to BKI) a quarter earlier.