Macroprudential measures related to retail loans granted by credit institutions
At its meeting held on 28 December 2021, the CBCG Council adopted the Decision on Macroprudential Measures Related to Retail Loans Granted by Credit Institutions (OGM 138/21). This decision repeals the the initial Decision on Macroprudential Measures Related to Retail Banking Loans (OGM 58/19 and 107/20) that targeted the same issue.
The measures were adopted with the aim of establishing the sustainability of retail lending, in the context of preserving financial stability by the CBCG. Namely, in recent years, we have witnessed a notable growth in the amount of cash loans, their share in total loans, as well as the extension of maturities of these loans (see Box 3 in Financial System Stability Report for 2018). As a rule, only bills of exchange and administrative bans were used as the security for retail loans. Continuation of this trend could make credit institutions much more vulnerable in the event of an economic and financial crisis, which would directly affect borrowers' earnings and reduce their credit capacity, which would further affect credit institutions and possibly their willingness to extend loans and the terms and conditions of those loans. The aforesaid decision has been in effect as of 1 January 2022 and its amendment extends the initially prescribed decision validity of one year to two years, so the measures will remain in effect until the end of 2023.
Basically, the decision stipulates that credit institutions may grant retail cash loans with a maturity exceeding eight years only against quality collateral in the form of immovable and movable property or in any other adequate way. Furthermore, credit institutions whose amount of retail cash loans with a residual maturity of over six years exceeds 50% of their own funds may grant retail cash loans with a maturity of more than six years only against the abovementioned collateral. Finally, credit institutions whose share of non-performing cash loans in total cash loans with agreed maturity over six years that have not been properly collateralized is below 3.5%, may grant cash loans whose maturities may exceed the aforesaid eight year and six year maturities respectively, for 2 additional years.
Interim Measures to Mitigate Negative Impact of the Communicable Disease Covid-19 Epidemic and the Situation in Ukraine on the Financial System
Decision on Interim Measures to Mitigate Negative Impact of the Communicable Disease Covid-19 Epidemic and the Situation in Ukraine on the Financial System (OGM 135/22) was adopted at the CBCG Council meeting held on 5 December 2022. Prior to that, four decisions had been in effect and they targeted the negative effects of the pandemic and the situation in Ukraine, these being: Decision on Temporary Measures to Mitigate the Negative Effects of the Novel Coronavirus on the Financial System (OGM 19/20, 28/20, 42/20), Decision on Interim Measures to Reduce the Negative Consequences of the Effect of the Novel Coronavirus Epidemic on the Financial System after Mitigation of Measures to Protect the Population from Infectious Diseases (OGM 46/20), Decision on Interim Measures to Mitigate the Negative Effects of the Communicable Disease COVID-19 Epidemic on the Financial System (OGM 80/20, 105/20, 24/21, 33/21, 45/21, 53/21, 116/21), and Decision on Interim Measures to Mitigate Negative Impact of the Communicable Disease Covid-19 Epidemic and the Situation in Ukraine on the Financial System (OGM 138/21, 54/22, 62/22).
The latest decision on interim measures groups several measures targeting the negative effects of the coronavirus pandemic and the situation in Ukraine on the financial system: 1) a ban on the payment of dividends to shareholders of credit institutions other than payments in the form of shares of a credit institution; 2) allowing credit institutions to exclude 100% of unrealised losses incurred after the aforesaid Decision has entered into force from the calculation of CET1 capital items when valuing certain available-for-sale debt instruments determined in accordance with IFRS 9, which are included in other comprehensive income; 3) a possibility for a credit institution, when assessing the creditworthiness of the borrower and allocating asset items to the appropriate classification group or subgroup, to exclude all or certain criteria established in accordance with Article 12 paragraph 3 of the Decision on minimum standards for risk management in credit institutions and which relate to 2020; and 4) a reduction from 12% to 6% (annually) of fees to be paid by credit institutions to the CBCG for using the prescribed amount of their reserve requirement which has not been returned on the same day.