The Bank of Russia Raised Limits on Uncollaterilized Credits

On April 10, 2009, the Bank of Russia ruled to raise credit limits on uncollaterilized loans.

This decision is effective with respect to credit institutions that meet the following criteria:
  • an international rating of a long-term credit standing not lower than B- by S&P and Fitch’s classification or not lower than B3 by the Moody’s classification;
  • they have made a decision on convening the general shareholder meeting with the inclusion in its agenda the issue of the reorganization of the credit institution in the form of merger or acquisition and submitted the respective information to the Bank of Russia;
  • they have agreements by which creditors have laid a claim to the credit institution of an early execution of obligations due to the emergence of developments conditioned by the reorganization and have submitted the respective information to the Bank of Russia.
So, this measure is aimed at extending the CBR’s possibilities to grant financial support to credit institutions that participate in M&A processes. We believe this is a correct move, as the national banking system is overly fragmented, with a large number of banks de-facto failing to exercise the classical banking functions. In such a situation, encouragement of consolidation in the sector appears a quite justifiable move on the part of the monetary and credit regulator.

P. Trounin, Head, the Department of Monetary and Credit Policy