Bank of Russia lowers macroprudential add-ons for credit card grace periods

The Bank of Russia has decided to adjust risk-weight add-ons following the implementation of a revised regulation that dictates how macroprudential add-ons are set. Specifically, the add-ons for credit card debt during grace periods have been reduced, while those for other assets remain unchanged.

The Bank's decision was informed by data indicating that credit card debt during grace periods exhibits lower default rates—two to three times lower compared to post-grace period debt. Borrowers typically use credit cards for transactions without accruing interest during these periods, lowering the likelihood of arrears. The risk profiles of customers who repay their debt within the grace period are generally more dependable. Consequently, the Bank has amended its regulation to establish macroprudential add-ons based on a borrower's debt service-to-income ratio (DSTI).

For debts on loans initiated from February 1, 2025, with a credit limit during the grace period, different DSTI ranges correspond to varying levels of add-ons:

- No DSTI: 2.0

- (0–30]: 0.2

- (30–40]: 0.2

- (40–50]: 0.2

- (50–60]: 0.5

- (60–70]: 1.0

- (70–80]: 1.5

- 80+, No DSTI calculated: 2.0

Add-ons for credit card debt after the grace period will follow a matrix effective from December 2, 2024.

As per assessments by the Bank of Russia, given current loan structures, the average add-on for credit cards during grace periods is expected to be around 0.7 (70%). This type of debt accounts for about one-third to half of overall credit card debt in large banks today.

Despite reduced add-ons and a deceleration in lending growth—the unsecured loan portfolio decreased by 1.9% in December 2024 after stable figures in October and November—the macroprudential capital buffer for unsecured consumer loans is projected to continue accumulating due to gradual loan portfolio renewal.

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