The regulator introduced easing of some requirements for banks
Against the aggravating situation due to the spread of the coronavirus, the Central Bank decided to introduce requirements exemption for credit institutions to work with travel companies, carriers, manufacturers and suppliers of medical equipment and drugs, Forbes reported.
Until September 30 of this year banks will be able not to reduce the assessment of the debt of these companies, which were restructured as a result of profits plummeting. In addition, credit institutions have the right to freeze the creation of reserves for tour operators and transport companies whose business has been affected by the spread of the coronavirus. For manufacturers of medicines and equipment, banks will be able to introduce a reduced risk ratio of 70% on ruble loans, and also cut down this indicator to zero. It follows that creditors will be able to mitigate the pressure on the capital of the companies, says Yuriy Belikov, manager of Expert RA.
As for the increased volatility of the markets in the recent period, the Central Bank said that it is ready to take the necessary measures to strengthen the country’s economy if necessary.
Stanislav Volkov, director of the NKR agency, noted the targeted support of banks. The Central Bank provided support only to those companies whose portfolio compiles no more than 8% of the corporate portfolio, even if they have Russian Railways and Transneft’s shares. The level of medical equipment manufacturers is also not disclosed, but it is clearly smaller. From these it follows that the Central Bank doesn’t see the need for drastic measures to strengthen the market at the moment, and probably attention will be shifted to reducing volatility in the financial markets.
According to Anton Lopatin, director of Fitch Ratings, loans in the tourism and transport sectors are distributed evenly, so they are not in the portfolios of credit institutions. Most of the financial support for carriers is provided by leasing organizations and other private companies. It is not clear from the announcement of the regulator whether they will be taken into account when providing support.
Probably, the measures proposed by the entity will not supply significant support, since they are targeted and aimed at small industries, according to Denis Poryvai, an analyst at Raiffeisenbank. He is confident that for real support it is necessary to introduce a wider range of measures to support the financial sector. Due to the devaluation of the national currency, a revaluation of all foreign exchange assets occurs not only in these industries. As a result, the level of capital in all credit institutions will decrease.
There is also a danger that interest rate risks will materialize – refinancing rates may rise at a time when banks actively distributed loans last year in anticipation of a decrease by the regulator. Even a small surge can negatively affect many banks.
An additional jeopardy arises in the area of consumer lending. Bank customers, whose standard of living was at a low level, will find themselves in a difficult situation. Under these conditions, the risk of a credit bubble in the retail segment, which was often discussed last year, may come true. Given the small capital growth of many banking organizations, they will need either additional capitalization or significant benefits from the regulator.