In 2013, the National Bank took a number of measures to limit interest rates on consumer loans and the volume of consumer lending.
Since 1 January 2014, amendments to the Regulations on safe functioning requirements came into force, changing the approach to assessing credit exposure risk in respect of loans to individuals, when calculating regulatory capital adequacy (Resolution of the Board of the National Bank of 20 September 2013 No. 544).
A risk weight of 75% was preserved for loans at an interest rate not exceeding the effective refinancing rate increased by 150%. A risk weight of 200% was set for loans at an interest rate exceeding the refinancing rate increased by 150% but below or equal to three times that amount. For loans at an interest rate exceeding three times the amount of the refinancing rate a risk weight of 500% was set.
Thus, loans with annual interest rates exceeding 58.75% and up to 70.5% belong to the VIII risk group with a risk weight of 200%, while loans with an annual interest rate exceeding 70.5% belong to the IX risk group with a risk weight of 500%.
In addition, since 12 December 2013, for consumer loans at annual interest rates exceeding twice the amount of the refinancing rate (ie 47% as of 1 February 2014) banks are required to form a special reserve for potential losses on assets subject to credit risk of 100% of the total amount of those loans (Resolution of the Board of the National Bank of 9 December 2013 No. 720).
The new regulation does not apply to previously concluded loan agreements (if they are not amended to increase the loan amount).
These measures are aimed at limiting the economic feasibility for banks to provide consumer loans at high interest rates.
