The regulator will be able to introduce a quantitative ban on the issuance of too risky loans
President Vladimir Putin instructed the government to develop a bill that would give the Central Bank new powers. Officials must prepare and accept the document by December 1 of this year. Its meaning will be that the Central Bank will be empowered ” to establish direct quantitative restrictions on the volume of unsecured loans (loans) for consumer purposes provided by credit institutions and microfinance organizations.”
This means that the Central Bank will have a convenient tool to curb banks that pursue excessively risky policies. In recent years, financial institutions have provided loans to almost everyone. And at the same time, they do not pay attention to the borrower’s solvency and its credit burden. The pandemic has untied their hands. For this period, the Central Bank gave concessions to banks so that they could help those borrowers who wanted to refinance their loans. Banks have taken advantage of this and now, at the end of the year, expect a record for all-time in net profit. The entire sector can earn 2.5 trillion rubles. This is almost 10% of all federal budget expenditures. A colossal amount.
At the same time, the Central Bank noticed two trends. First, the most growing portfolio is in unsecured lending (when money is given to borrowers in cash and does not require collateral). Secondly, the terms for such loans are increased. The share of five-year loans has grown significantly over the year. And the longer the term, the higher the likelihood of delay. Especially with the current, by no means low, interest rates on cash loans.
The Central Bank has already begun to gradually cool down the market, using its available opportunities. Since October 1, the regulator has increased the premiums on unsecured loans. Their essence is that it becomes less profitable for banks to lend money at high rates and to those borrowers who already have a lot of debt. For each ruble issued, they will have to allocate more money to reserves. This is the so-called macroprudential measure. Its purpose is to prevent banks from taking too much risk. At the same time, the Central Bank does not take money from them and does not limit the amount. It just makes lending less profitable. After all, the money that banks have in reserves is not in circulation. This means that you cannot receive additional income from them.
Nevertheless, as the practice has shown, such restrictions do not stopbanks. Although the lending rate has slowed down a little, it still remains high. And this increases the risks of the financial system. Indeed, in the event of a crisis, the banks’ losses will begin to grow, and in the event of bankruptcy, the Central Bank will have to clean up all this. To avoid such a scenario, the Central Bank convinced the president to give them more powers. It is not a fact that the regulator will use them, but now it will definitely be able to threaten.
The share of borrowed Russians is growing. According to the Central Bank, the average Russian borrower gives 60% of their income to banks. At the same time, every third gives the bank even more – over 80% of its income. The statistics can be distorted by the shadow labor market. Official income is not always equal to real income. Therefore, in reality, a person can give a smaller share. According to estimates by the Higher School of Economics, the shadow market occupies about 20%. That is, every fifth person receives either part or all of his salary in an envelope. However, even if you keep this study in mind, the number of Russians on credit is still large.
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