At the end of 2024, the Bank of Russia released updated approaches to credit risk assessment by banks. These updates were made following discussions with market participants and are expected to take effect in the third or fourth quarter of 2025. The aim is to limit risks and reduce the burden on banks where risks have been deemed excessive.
In terms of provisioning, the regulator plans to specify a closed list of official documents required for assessing an individual borrower's income. If such documents are unavailable, banks may include loans up to ₽200,000 in their portfolios of homogeneous loans, but these will be subject to increased loan loss provisions. Additionally, a higher provision ratio will be introduced for mortgage loans where payments increase by more than 20% per year and where the total grace period exceeds three years. This measure aims to protect borrowers who may not fully understand the risks associated with sharp payment increases and discourage banks from engaging in schemes that inflate flat prices beyond their real market value.
Regarding capital adequacy ratios, several measures will be implemented:
- All banks with a universal license will adopt a finalized approach that is more sensitive to risk. This change is intended to enhance risk assessment quality across the sector and create a level regulatory field for market participants.
- Requirements for investment-grade borrowers (risk weight of 65%) will be tightened to ensure only highly reliable companies qualify. Borrowers or their parent companies must have at least an A national rating and a standalone credit rating of at least BBB+.
- Reduced risk weights for small and medium-sized enterprises (SMEs) with outstanding loans over ₽8 billion will be discontinued as these entities are effectively large corporates meeting SME criteria only superficially.
- Risk weights for mortgage loans will be updated based on default statistics and standardized across shared construction agreements and mortgages for existing housing.
The report on concentration risk regulation concepts presented last summer has been completed. It outlines further measures needed to finalize regulations and sets timelines for implementation.
Further information can be found in the Banking Regulation Review for Q4 2024.