Macroprudential measures related to retail banking loans
At its meeting held on 14 October 2019, the CBCG Council adopted the Decision on Macroprudential Measures Related to Retail Banking Loans (OGM 59/19). The measures are introduced with a view to maintaining sustainability of retail lending, in the context of the CBCG`s role in preserving financial stability. To wit, the amount of cash loans and their share in total loans increased over recent years, as did the repayment periods for these loans (see Financial Stability Report 2018, Box 3). As a rule, banks use only bills of exchange and administrative orders as collateral; however, should this practice continue, this would make banks much more vulnerable in case of a potential economic and financial crisis, and that would directly affect borrowers' earnings, including their loan repayment capacity, but the banks as well and probably their willingness to offer lending and conditions under which they would continue granting loans in such situation. The Decision shall apply as of 1 January 2020 and shall be effective for two years.
Basically, the decision stipulates that banks may extend cash retail loans with a repayment period over eight years provided that the loan is fully secured by a real estate, movable property or in any other appropriate way. Besides, a bank holding in its credit portfolio cash retail loans with a residual maturity over six years that exceed 50% of the bank`s own funds may grant retail cash loans with a repayment period longer than six years provided that they have been secured by the aforementioned collateral. Finally, banks are obliged to calculate indicators of credit indebtedness individually: LTI, DTI, LSTI, DSTI and LTV - for all types of granted retail loans, and, in particular, for cash retail loans - to keep records of those indicators and determine their acceptable levels