Bank of Russia reduces macroprudential add-ons for credit card grace periods
The Bank of Russia has approved risk-weight add-ons in connection with the entry into force of a new version of the regulation establishing the procedure for setting macroprudential add-ons: the add-ons for the credit card debt during the grace period1 have been reduced, while those for other assets have remained unchanged.
Making its decision, the Bank of Russia Board of Directors was guided by the following.
According to banks’ data, the credit card debt during the grace period is characterised by lower default rates (two to three times lower compared to the debt after the end of the grace period). Borrowers mostly use credit cards for transactions and pay no interest on the debt during the grace period, which reduces the probability of arrears. The risk profiles of the customers repaying their debt over the course of the grace period are generally more reliable. In view of this, in order to increase risk sensitivity, the Bank of Russia has amended the regulation so as to set the macroprudential add-ons for outstanding amounts during grace periods depending on a borrower’s debt service-to-income ratio (DSTI).
Risk-weight add-ons for debt on loans created beginning on 1 February 2025 with a credit limit during the grace period
| DSTI range, % | ||||||||
|---|---|---|---|---|---|---|---|---|
| No DSTI | 80+, No DSTI calculated |
|||||||
| Add-ons | 2.0 | 0.2 | 0.2 | 0.2 | 0.5 | 1.0 | 1.5 | 2.0 |
The add-ons for the debt on credit cards after the end of the grace period will be set pursuant to the matrix of the add-ons effective from 2 December 2024.
For reference: the risk-weight add-ons for unsecured consumer loans issued beginning on 2 December 2024.
| Add-ons | DSTI range, % | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| No DSTI | 80+, No DSTI calculated |
||||||||
| DSTI range, % per annum | 1.8 | 0.0 | 0.0 | 0.2 | 0.3 | 0.7 | 1.2 | 1.8 | |
| 2.0 | 0.0 | 0.2 | 0.3 | 0.5 | 0.9 | 1.4 | 2.0 | ||
| 2.4 | 0.4 | 0.5 | 0.7 | 0.9 | 1.3 | 1.8 | 2.4 | ||
| 2.9 | 1.0 | 1.2 | 1.4 | 1.7 | 2.0 | 2.3 | 2.9 | ||
| 3.6 | 1.6 | 1.7 | 1.9 | 2.2 | 2.6 | 3.0 | 3.6 | ||
| 3.8 | 1.7 | 1.8 | 2.0 | 2.6 | 3.0 | 3.2 | 3.8 | ||
| 4.0 | 1.8 | 2.0 | 2.2 | 3.0 | 3.2 | 3.5 | 4.0 | ||
| 5.0 | 2.0 | 2.2 | 2.5 | 3.2 | 3.5 | 4.0 | 5.0 | ||
| 60+ | 6.0 | 6.0 | 6.0 | 6.0 | 6.0 | 6.0 | 6.0 | 6.0 | |
As assessed by the Bank of Russia, given the current structure of issued loans, the average add-on for a credit card during the grace period will equal 0.7 (70%). This type of debt with large banks today accounts for a third to a half of the overall debt on credit cards. Despite the reduced add-ons for this part of the loan portfolio and a lower growth rate of lending (over December 2024, the unsecured loan portfolio contracted by 1.9% after near-zero changes in October—November 2024), the macroprudential capital buffer for unsecured consumer loans2 will generally continue to accumulate as a result of the gradual renewal of the loan portfolio.
1 A credit institution charges interest on the current debt at a rate set in the consumer loan agreement for bank card transactions and collects no repayments on the loan, except for the principal repayments, in accordance with this agreement during the period specified therein.
2 As of 1 December 2024, the macroprudential capital buffer for unsecured consumer loans (including cash loans) totalled ₽0.8 trillion (6% of the portfolio of such loans).
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