The Central Bank reduces reserves for banks for credit lines and guarantees not demanded by clients

The Central Bank significantly reduces the amount of reserves for banks for credit lines and guarantees not demanded by clients. Experts estimate the volume of such credit lines at 35 trillion rubles. and believe that innovations will have a positive impact on the banking business. However, they doubt that in the context of a slowdown in lending and rising funding costs, banks will transform these easing into improved conditions for customers, as the regulator hopes.

The Bank of Russia has published instructions (effective October 23) according to which banks can reduce reserves for contingent credit obligations, which include credit lines, including credit cards, bank guarantees and other similar instruments.

“A decrease in conversion rates (currently 100%) will reduce pressure on banks’ capital and will lead to an increase in the availability of off-balance sheet products for clients,” the regulator notes. We are talking about loan funds approved, but not yet claimed by the client, as well as guarantees for which the bank has not yet paid.

In particular, deductions under guarantees in favor of customs and tax authorities are reduced by five times – the conversion coefficient by which the amount of the reserve is multiplied will be 0.2. The same coefficient is applied to guarantees issued as security for applications for participation in government procurement or for contractors performing major repairs in apartment buildings.

Reserves for issued letters of credit, unused limits of credit lines or overdrafts for legal entities to replenish working capital are reduced by half (coefficient 0.5). For similar instruments for citizens, the coefficient will be 0.75, and for other loans to legal entities and individuals – 0.8.

The step looks timely against the backdrop of an increase in the Central Bank’s key rate and tightening of consumer lending rules. As the head of Sberbank, German Gref, said on the sidelines of the Russian Energy Week, a significant slowdown in lending has already been observed since October 1: “The question is probably not so much in demand, but in the fact that… banks will be forced to refuse a large number of clients due to the macroprudential measures taken supervision.”

Restrictions on issuing loans for borrowers with high debt loads began to apply in September. According to Frank RG, this month, issuances in the retail unsecured lending segment fell by 22% compared to August (see Kommersant of October 7).

However, experts believe that the innovations will most affect loans and guarantees for legal entities. Valery Piven, head of the financial institutions ratings group at ACRA, estimates the total volume of contingent credit obligations as of August 1 at more than 35 trillion rubles: “The main volume was undrawn credit lines.” In his opinion, changes in reserves “will have a positive effect, but now their total volume is insignificant.”

“Taking into account the decline in net interest margin and the imminent slowdown in the rate of generation of new profitable assets, a moderate reduction in the burden on capital and the financial results of banks can be considered quite appropriate,” says Yuri Belikov, managing director of the Expert RA rating agency. Over time, he notes, a reduction in the cost of risk for banks could also lead to lower rates on loans with limits on issuance or debt and fees for issuing guarantees.

However, the expert doubts that in the context of rising funding costs and uncertainty regarding the timing and prospects of a reversal of this trend, as well as expectations of an increase in the rate of losses on active operations, banks will transform the received relief into the cost of products for clients.

Maxim Builov