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Business Duty Officer

It is necessary to stabilize the level of debt load of citizens

It is necessary to stabilize the level of debt load of citizens

Yesterday we wrote about, that officials of the Central Bank of the Russian Federation set restrictions for banks to issue unsecured loans. Member of the General Council of Business Russia, Head of the Expert Center for Criminal Law Policy and Enforcement of Judicial Acts, ambassador “business officer” Ekaterina Avdeeva believes, that the Central Bank in most cases shows a balanced position:

“In order to assess the establishment of macroprudential limits on unsecured consumer loans and measures to prevent the risks of excessive debt burden with subsequent inability to fulfill credit obligations, a comprehensive analysis is required.

In the context of the structural restructuring of the economy, the indicators of the debt burden of the population cause concern. The restriction on issuing loans is designed to protect banks from the risk of losing liquidity, which in the future may provoke the revocation of the license and have a negative effect on the financial and budgetary system of Russia. It should be noted, that the revocation of a license always leads to quite serious consequences not only for the credit institution itself, but also for individuals and legal entities, who are served there.. Guarantees, provided by the state for insurance of deposits of individuals, do not apply to companies, who conduct settlement and cash services and can store funds in the accounts of a credit institution. In the event that the bank has financial problems, legal entities will face serious consequences up to bankruptcy and default on their obligations., which will launch a chain reaction of negative processes in the field of economic activity.

Undoubtedly, it is necessary to stabilize the level of debt load of citizens, as well as assess the real creditworthiness of the population and the possibility of timely repayment. Balanced ratio of income and expenses per capita of the borrower, households allows to more accurately predict the behavior of consumers of financial services. Bank of Russia statistics show a slowdown in consumer lending growth over the past six months, which indicates a more balanced decision-making when applying for a consumer loan.

At the same time, consumer lending stimulates consumer demand. it, in its turn, has a direct impact on the development of business and the economy, as the consumption power of the population increases. This is extremely important to stimulate the economy.

It is important to emphasize, that in the case of restrictions on the volume of loans issued, the need for lending may encourage appeal to lenders and organizations, outside the control of the regulator. In particular, it's a leaseback, when a person applies for a secured loan, and in the end receives a contract of sale and his own property as a leased asset (reverse leasing). The main negative of such a model often lies in unreasonably high percentages, which are practically impossible for the population. Usually, people go for it because of a hopeless situation. Not only start-up entrepreneurs apply for such loans., but also socially vulnerable groups of the population, such as pensioners, employees of budgetary organizations, who need funds for treatment, tuition fees and other emergency needs, which they deem necessary to meet without fail.

It should be noted, that consumer lending without collateral is often the main activity of microfinance organizations. And in case of restrictions, this can significantly affect the already built business model., and consequently, entail consequences up to the revocation of the license and bankruptcy of such companies.

In this connection, when it comes to the need to restrain growth rates and prevent excessive debt load on the population, the answer is unequivocal in terms of full support for such a position. The Central Bank proceeds from the analysis of many indicators, which, Maybe, not immediately obvious.

In the initial analysis, the setting of macroprudential limits on unsecured consumer loans cannot be perceived as unequivocally useful, given those factors., which may have a negative effect. The Central Bank in most cases shows a balanced position. Seems, that more stringent borrower solvency assessments and scoring models could, probably, have a similar effect, but without limiting macroprudential limits”.

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