The Central Bank will devalue the loans to unscrupulous borrowers

The Central Bank will devalue the loans to unscrupulous borrowers

A new approach to assessing the quality of corporate loans granted by Russian banks, the Central Bank said on Tuesday, April 11, at the official website in the information letter, addressed to the territorial divisions of the regulators and the bankers. A letter signed by the Chairman of the Bank of Russia Vladimir Talinum, in charge of Central Bank oversight for banks. The reason for publication of the document led to numerous questions arising in the classification of corporate loans in a particular quality category, explained in a letter.

In total, according to Bank of Russia regulations issued by the banks loans are classified in five quality categories: standard, sub-standard, doubtful, problem and hopeless loans. The quality of loans is assessed by banks directly on the basis of how it serves the borrower and circumstantial evidence — in particular, on the basis of data about the maintenance of the same borrower of the loans taken in other banks. The quality of a loan depends on the size of the reserve (from 0 to 100% of loan amount) generated by the Bank for impairment. Since the provision is an expense that reduces profit of the Bank, credit institutions often tend to overestimate the quality of the loan.

In such a situation, according to the letter of the Central Bank, the regulator intends to independently verify the quality of corporate loans according to the specified characteristics. Upon receipt of the Bank information about the improper execution of service by the borrower of loans from other banks they can be converted to a lower quality category, and the Bank may be exposed to the requirement for additional reserves on them.

All of the surveyed bankers said that until now, similar kinds of letters from the Central Bank they did not. The output of the letter they link with the fact that in 2016, the Central Bank was finally established the service of risk analysis, which aims including the assessment of credit quality of Bank borrowers.

Dmitry Tulin

Photo: Oleg Yakovlev /

Not full control

According to market participants, most players in the internal documents on risk control stated point about the need to keep track of how borrowers service their loans taken from other banks, but every Bank does it differently, based on the amount of information which he considers to be available to you.

“The Bank will use all available means to obtain such information. Reserves are adjusted on a daily basis,” — said the Director of the Department of integrated risk assessment of ROSBANK Eugene Kobzev. “When analyzing a loan application and in the period of the loan agreement the borrower is obliged to provide information about the presence of overdue liabilities of other banks where it is serviced and/or has existing credit agreements. In addition, banks have the opportunity to obtain information about the presence of overdue payments on loans from credit history Bureau (BKI). Since the detection of these factors reserves dootdoot immediately,” says the Director of the Department of risk management SMP Bank Albina Balashova.

However, this approach is not optimal: the lender may not provide all the necessary information that specifies the representative of the Bank of the top 30. “Besides, now is not enshrined in law the obligation of the banks to transmit information on the credit history of legal entities in BCI and BCI data may not contain information about negative credit history of a particular borrower,” — said the Chairman of the Board of Bank “URALSIB” Natalia Tutova. Banks may also request letters from other banks about the absence of negative credit history of the borrower, she adds. However, consent from the counterparty Bank to provide this data is also not guaranteed.

Banks keep track of overdue indebtedness of their borrowers and legal claims to them from other credit institutions, but between the occurrence of overdue debts and the advent of the information about the lawsuit takes significant time, says the managing Director on Bank ratings “Expert RA” Stanislav Volkov. As a result, now the banks do not always have information about what the payment discipline of their clients, other banks, says head of group Finance ACRES Kirill Lukashuk.

The implications for the market

Given that the Central Bank has access to all information at all banks, the possibility to assess the real quality loans, the regulator more than the market participants. “If loans are classified by the Bank of Russia in a lower category, this will naturally entail additional reserves”, — said the press service of the Bank “East”. Spending growth on reserves will reduce the profit of those banks and increase the losses of the losing players, say bankers.

However, the scale of the potential costs of the banks for additional reserves in the event of bulk sale, the Central Bank announced the approach of the market participants and the experts was not able to assess. Open statistics on this issue. But, according to experts, it in any case is not isolated cases. “Cases where one Bank customer service the loans and the other no, do not rare,” confirms senior Director Fitch Ratings Alexander Danilov.

First, the revaluation of the quality of loans can affect the loans of large and medium-sized corporate customers, which due to the scale of their business is often credited to several banks, said Kirill Lukashuk.

“The pressure on profits of banks as a result of additional reserves will be reduced if the Central Bank will keep track of troubled borrowers in real time and not accumulate claims until the next field audit. This approach would somewhat mitigate the negative impact of this innovation on the profitability of banks”, — says Stanislav Volkov.

The Bank of Russia did not comment on the situation.