The Bank of Russia has announced the implementation of a national countercyclical capital buffer for banks' capital adequacy ratios, set at 0.25% of risk-weighted assets. This measure will take effect from July 1, 2025. The decision aims to enhance the resilience of the banking sector and support balanced credit growth.
The Bank's Board of Directors considered several factors in making this decision. Alongside macroprudential add-ons currently applied to unsecured consumer loans, car loans, and mortgages, the Bank's macroprudential toolkit includes the countercyclical capital buffer. This buffer is accumulated during periods of accelerated credit growth and released during crises to increase banking sector resilience against potential shocks.
"The Bank of Russia assumes that countercyclical capital buffer should be set at 1% of risk-weighted assets in the long-term," stated the press release.
Lending growth by the banking sector remains high, with unsecured consumer lending growing by 25.6% year-on-year as of August 1, 2024. This rate surpasses household income growth, which stood at 16.8% from Q2 2023 to Q2 2024. Corporate lending grew by 21.2% year-on-year as of August 1, 2024, comparable to nominal GDP growth at 19.5% from Q1 2023 to Q1 2024.
According to mid-term forecasts by the Bank of Russia, debt growth among companies and households will exceed GDP growth in nominal terms until the end of 2027.
In light of prolonged accelerated credit growth accompanied by a decreasing capital adequacy ratio—from 12.7% in one year to an estimated drop from 12.2% to 11.2% over seven months in early 2024—the Bank decided on a positive countercyclical capital buffer value.
"Currently, most banks comply with capital adequacy ratio with a safety margin," noted the statement, suggesting that setting this buffer would have minimal impact on lending while enhancing banks' stress resilience.
The schedule for achieving a target level for this buffer—set at 1%—will be discussed in 2025 based on credit cycle phases and banks' recovery pace regarding their capital buffers.