Changes in the consumer credit market in conditions of tightening of the Bank of Russia's macroprudential measures in 2019

Abstract

Subject. In 2019, the Bank of Russia updated and toughened regulatory approaches by increasing the capital requirements depending on borrowers’ debt burden. The disclosed bank statements have significantly changed and become more complicated. This enabled a comprehensive statistical analysis of the consumer credit market structure in 2019, based on effective interest rate and payment-to-income (PTI). Objectives. The purpose of the study is to assess how the strengthened capital adequacy requirements influence the change in the effective interest rate on consumer loans and how banks consider debt burden of borrowers when issuing such loans. Methods. The study draws on methods of statistical analysis of reporting forms presented by credit organizations in open databases of the Bank of Russia. A dynamic model is used for analytical determination of average maturity of consumer loans based on their effective interest rate. Results. I estimated trends in outstanding consumer loans in all ranges of their full cost (effective interest rate), analyzed the impact of the new requirements of the Bank of Russia with respect to risk cover on consumer loans by banks’ own funds on the capital adequacy of banks in the medium term. Conclusions. In 2019, loans with low effective interest rate (less than 20%) demonstrated the lowest growth rates; the volume of consumer loans to borrowers with high debt burden did not reduce; only a small number of banks incurred risk to capital adequacy due to strengthened requirements. Thus, the Bank of Russia’s macroprudential measures for consumer lending regulation cannot be regarded as effective.