Page 62 - RusRPTDec18

lower than 2012–2013 at circa 20% now against 30–50% then. But now the growth of the retail portfolio is approaching that of four years ago, the record for the volume of consumer loans issued has already been broken. In August, banks lent RUB776.5bn rubles to the population – an all time high. Consumer loan volumes got nowhere near this amount in 2012 and 2013 with the portfolio reaching RUB700bn in both years.
Russian private consumption has continued a modest recovery this year, rising by around 2.5% year-on-year in January-June. Spending has been boosted by a credit boom, with household borrowing projected to rise by about 20% this year. The boom in consumer spending has got the Bank of Russia worried. In September it tightened the capital requirements for banks issuing consumer loans with interest rates above 10% a year.
From September 1, the Central Bank will make it less profitable for banks to issue consumer loans if their total value exceeds 10% per annum. For such loans, higher risk ratios will be applied when calculating standards, which means they will need more capital. The regulator limits the ratio of capital to assets of 8%, but the assets are weighted by risk. The higher the risk, the lower the value of the capital adequacy ratio. Now the loan with the total cost of 10–15% of annual banks is taken into account with a 100% ratio. Since September, the ratio for such loans will increase to 130%. This follows from the draft instructions of the Central Bank, which the regulator posted on the website on July 10. The bottom line is that with the same amount of capital, banks will be able to issue fewer loans. Now there are no unsecured loans at a rate of less than 10% on the market, for many banks this will cut the ground from under their feet.
In macro terms, the level of household borrowing in Russia is low. At the start of 2018, the ratio of household borrowing to GDP was 13.2%, compared with 71-76% in the OECD, and 28-39% in emerging economies. On a macro level, therefore, household credit does not appear excessive and seemingly has significant room for growth. The problem is that a large fraction of Russians who borrow tend to run into difficulties.
But the share of non-performing consumer loans in Russia is twice as high as the global average, and 70% higher than in the euro zone. In 2017, one in five borrowers said they missed repayments on consumer loans. The main reason for this is that most household borrowing in Russia tends to be unsecured loans for consumer goods, which are taken out for short periods at high levels of interest.
62 RUSSIA Country Report December 2018 www.intellinews.com