Risk reduction for new regions – Kommersant

The Bank of Russia intends to reduce the amount of credit risk on claims on corporate borrowers in four new Russian regions — the DPR, LPR, Kherson and Zaporozhye regions. Formally, this does not mean a reduction in credit risks, but is intended to stimulate lending in these territories by reducing the burden on banks’ capital. However, for now, the winners will be those banks that are already present in the regions, the largest of which is PSB.

The Bank of Russia plans to establish a preferential risk ratio for loans to corporate clients registered in four new regions — the DPR, LPR, Kherson and Zaporozhye regions. This is evidenced by the draft amendments to the instruction “On mandatory ratios and allowances for capital adequacy ratios of banks with a universal license”. The text of the document was published at the end of last week on the regulation.gov.ru portal.

At present, a reduced risk factor applies to loans to enterprises in the Crimea and Sevastopol. As explained in the Bank of Russia, their introduction allows “to reduce the burden on the capital of banks for such loans.” At the same time, the risk coefficient established in the document in the amount of 75% of the loan amount “does not depend on the date of its issuance,” the Central Bank indicates. This may mean that banks will be able to apply it to loans already issued, and not just newly issued ones. “At present, such loans provide for the application of risk ratios on a general basis, including the use of increased risk ratios (up to 150%),” the Bank of Russia explained.

Currently, Promsvyazbank mainly operates in the new territories, with 358 branches registered there. The volume of the loan portfolio at the bank was not disclosed, but in early May, PSB reported that since its work in the DPR and LPR (that is, since June 2022), the bank has opened more than 65 thousand accounts for corporate clients. The PSB explained to Kommersant that, in terms of risk weights, they are now using an approach similar to that in the rest of Russia: this indicator, in particular, is affected by the structure of the transaction and the type of activity of the company. And therefore, the bank responded positively to the regulator’s plans “to stimulate lending in new regions.” The implementation of other measures that help in managing credit risks, such as, for example, accounting for property rights and collateral, can positively affect the offer and issuance of loan products to companies and residents of the regions, the PSB also believes.

According to banking expert Alexei Nechaev, the effect of the Central Bank’s measure will be to expand the lending potential in these regions: “When applying a risk ratio of 75%, a bank per unit of capital will be able to lend in these regions by a third more than if it used capital for lending in other Russian regions. A lower risk ratio will save the bank’s capital, which, in turn, it can use to expand lending both in these regions and beyond, Mr. Nechaev notes.

The measure is aimed at encouraging banks to finance projects in these regions, but this does not mean a reduction in regional risks, said Roman Kenigsberg, head of the FBK’s internal audit and risk management department. At the same time, according to him, “since state-owned banks operate in these regions, this measure also makes it possible for the state to save money on their additional capitalization.” However, interest rates on loans should cover the risks, and if the state intends not just to finance individual projects, but to activate lending in general, then risk reduction tools should appear, such as state guarantees or state insurance, the expert believes.

Such a measure is primarily “valuable for capital-deficient credit institutions,” notes Mr. Nechaev. However, according to Roman Kenigsberg, by itself it cannot stimulate new banking players to enter these regions, since private banks are focused on high profitability. “If a bank has a capital deficit, if no one covers the risks for the bank, if such loans do not imply higher returns, then such lending can lead to an even greater decrease in capital,” he points out.

Olga Sherunkova