Russian central bank to act to curb growth in consumer lending
MOSCOW Dec 6 (Reuters) - Russia's central bank said on Friday it intended to limit the interest on loans to retail borrowers next year in a move aimed at minimising the risks to financial stability stemming from rising household indebtedness.
Russia has seen a credit boom in the last two years, with unsecured loans for consumer purchasing growing at an annual rate of up to 60 percent.
The central bank has moved to curb the rapid growth, demanding higher provisions and capital as safety buffers in case the stagnation of economic growth in the third quarter hurts household finances.
Third-quarter financial results showed banks such as Sberbank and Vozrozhdenie had to increase loan-loss provisions as the economic outlook darkened.
The financial committee of the Duma, Russia's lower house of parliament, backed amendments on Friday that would cap interest rates on retail loans. If the amendments are passed, the central bank will start next year calculating average market interest rates on specific types of consumer loans on a quarterly basis.
The rate set by banks should not exceed the cost set by the regulator by more than one-third.
"From a strategic point of view, that would help make some market segments more civilised, such as high-risk unsecured loans," said Andrey Klapko, an analyst at Gazprombank.
The move could impact banks primarily working in the high-margin business of consumer credit.
Consumer credit firm TCS, which raised over $1 billion in its London IPO in October, issued 710,000 credit cards in the six months to the end of June, with the interest rate for purchases ranging from 24.9 to 45.9 percent.
However, the amendments may not yield serious results if the effective rate does not take into account different fees, such as insurance-related commissions or cash withdrawal, said Alexander Danilov, a director at Fitch Ratings in Moscow.
"Even if banks lower rates as a result, they may win back the money by increasing fee income".