The National Bank of Belarus has taken measures to limit rates and volumes of consumer lending

October 2, Minsk / Anna Kot - BELTA /. The National Bank of Belarus has taken measures that will encourage commercial banks to limit interest rates and the volume of consumer lending. This was reported to BELTA by the Information and Public Relations Department of the National Bank.

Resolution of the Board of the National Bank No. 544 of September 20, 2013, introduced amendments and additions to certain regulatory legal acts of the National Bank. "The innovations, which come into force on January 1, 2014, change the approaches to risk assessment for credit debt arising from the provision of loans to individuals when banks calculate the indicators of regulatory capital adequacy," the National Bank explained.

Currently, Belarus is experiencing steady growth in consumer lending. "Despite the fact that the pace of its growth in the first half of 2013 can be assessed as acceptable, against the backdrop of increasing wage levels and stimulation of domestic consumer demand, there are prerequisites for an increase in the share of consumer loans in bank portfolios. At the same time, in the conditions of competition for clients and growing competition in the consumer lending market, so-called express loans are becoming increasingly popular," the National Bank noted.

Such loans involve increased credit risks for the bank, to compensate for which interest rates are set that significantly exceed the rates for standard consumer loans, which increases the credit burden on individuals.

"In this regard, the introduced amendments and additions to certain regulatory legal acts of the National Bank of Belarus provide for the differentiation of capital adequacy requirements for banks to cover risks on consumer loans, depending on the level of the annual interest rate. The base refinancing rate, set by the National Bank, will be used as a benchmark for interest rates, as the main indicator in determining the cost of loans in the economy," the National Bank noted.

For loans issued at a rate not exceeding the current base refinancing rate increased by 150%, it is planned to maintain the current risk weight (75%). For loans issued at a rate exceeding the refinancing rate increased by 150% up to three times its amount, a risk weight of 200% is established, and for rates exceeding three times the refinancing rate amount – 500%. "These measures will encourage banks to limit interest rates and the volume of consumer lending," the National Bank believes.

The planned changes will not affect consumer loans with social functions (such as loans for education, health improvement, etc.), as the interest rates on such loans are below twice the base refinancing rate. Also, the resolution does not provide for changes in the current procedure for assessing credit debt arising from the provision of loans to individuals for the construction (purchase) of residential premises.

In conclusion, the National Bank emphasized that the issue of regulating interest rates on consumer loans is being addressed in many countries around the world. -0-

News of Belarus (BELTA)