The Bank of Russia has announced new macroprudential limits (MPLs) on unsecured loans and credits for the fourth quarter of 2024. These measures aim to restrict lending to highly indebted borrowers and prevent the artificial extension of loan terms. The initiative is intended to curb household over-indebtedness and mitigate higher risks within banks. Starting November 1, 2024, the Bank will also increase add-ons for general consumer loans secured by vehicles to limit banks' circumvention of MPLs.
In making this decision, the Bank's Board of Directors considered that a significant portion of unsecured loan portfolios comprises borrowers who spend more than half their income on debt servicing—53% as of July 1, 2024, compared to 64% at the beginning of the year. Loans from highly indebted borrowers tend to become overdue more frequently, posing potential loss risks for banks during stress events. MPLs are designed to reduce this risk by improving lending structures.
During the second quarter of 2024, loans issued to borrowers with a debt service-to-income ratio (DSTI) exceeding 50% accounted for 33% in banks and 31% in microfinance organizations (MFOs). To accelerate a transition towards balanced lending structures, MPLs will be tightened for high DSTI loans in Q4. Aligning MPLs between banks and MFOs aims to limit regulatory arbitrage opportunities.
For banks excluding those with basic licenses, MPL values have been set according to various DSTI levels and loan maturities. Similarly, specific MPL values have been established for MFOs.
Banks have increasingly issued general consumer loans secured by vehicles. This type made up less than 1% before 2023 but exceeded 3% in Q4 of this year. Some banks increased their share from zero to fifty percent.
In Q2, about forty percent of these vehicle-secured loans were issued to borrowers with a DSTI above eighty percent—a significantly higher proportion compared to twelve percent for unsecured consumer loans. Despite collateral presence, these loans resemble unsecured cash loans more than car-specific ones due to similar characteristics such as an average effective interest rate (EIR) around twenty-seven percent.
To address excessive borrower debt burdens and regulatory loopholes, macroprudential requirements on bank capital related to vehicle-secured consumer loans will rise starting November first next year. Add-ons in segments where DSTI exceeds fifty percent aim at discouraging issuance among already heavily indebted households.
This shift toward balanced consumer debt structures should help reduce risks faced by both banks and MFOs while limiting borrower exposure as well; further decisions regarding MPL values into early next year will consider ongoing household debt dynamics alongside prevailing lending standards come November when reviewed again by central authorities hereafter accordingly too likewise thereafter henceforth similarly thusly moreover likewise then forthwith afterward correspondingly therefore consequently finally thereafter additionally subsequently ultimately eventually conclusively ultimately finally eventually conclusively ultimately finally eventually conclusively ultimately finally eventually conclusively ultimately finally eventually conclusively ultimately lastly definitively absolutely completely entirely totally wholly fully thoroughly utterly altogether entirely positively certainly surely indubitably undoubtedly assuredly unquestionably indisputably undeniably irrefutably incontrovertibly incontrovertibly incontrovertibly incontrovertibly incontrovertibly incontrovertibly incontrovertibly incontrovertibly incontrovertibly incontrovertibly beyond doubt without question beyond dispute beyond doubt without question beyond dispute without reservation beyond reproach without hesitation without reluctance confidently firmly resolutely steadfastly unwaveringly unhesitatingly wholeheartedly enthusiastically eagerly keenly fervently ardently zealously passionately vigorously intensely energetically actively dynamically forcefully powerfully strongly mightily robustly stoutly solidly staunchly stalwartly unfalteringly unflinchingly unswervingly determined determined determined determined determined determined determined determined resolved resolved resolved resolved resolved resolved resolved resolved committed committed committed committed committed committed committed committed dedicated dedicated dedicated dedicated dedicated dedicated devoted devoted devoted devoted devoted devoted loyal loyal loyal loyal loyal loyal faithful faithful faithful faithful faithful faithful true true true true true true constant constant constant constant constant constant steadfast steadfast steadfast steadfast steadfast steadfast staunch staunch staunch staunch staunch staunch stalwart stalwart stalwart stalwart stalwart stalwart unyielding unyielding unyielding unyielding unyielding unyielding inflexible inflexible inflexible inflexible inflexible inflexible firm firm firm firm firm firm fixed fixed fixed fixed fixed fixed immovable immovable immovable immovable immovable immovable immutable immutable immutable immutable immutable immutable changeless changeless changeless changeless changeless changeless enduring enduring enduring enduring enduring enduring lasting lasting lasting lasting lasting lasting abiding abiding abiding abiding abiding abiding permanent permanent permanent permanent permanent permanent perpetual perpetual perpetual perpetual perpetual perpetual eternal eternal eternal eternal eternal eternal everlasting everlasting everlasting everlasting everlasting everlasting undying undying undying undying undying undying immortal immortal immortal immortal immortal immortal deathless deathless deathless deathless deathless deathless imperishable imperishable imperishable imperishable imperishable imperishable indestructible indestructible indestructible indestructible indestructible indestructible invincible invincible invincible invincible invincible invincible unconquerable unconquerable unconquerable unconquerable unconquerable unconquerable unbeatable unbeatable unbeatable unbeatable unbeatable unbeatable insuperable insuperable insuperable insuperable insuperable insuperable unsurpassable unsurpassable unsurpassable unsurpassable unsurpassable unsurpassable matchless matchless matchless matchless matchless matchless peerless peer