Nabiullina Plans Steps to Slow Russian Unsecured Consumer Loans

Russia’s central bank is looking for new ways to slow the “overheated” market for unsecured consumer loans, Chairman Elvira Nabiullina said.

Bank Rossii is preparing proposals to curb the pace of the lending, Nabiullina told President Vladimir Putin today at a meeting outside Moscow. Changes last year have helped crimp annual growth to about 45 percent from more than 60 percent in 2012, First Deputy Chairman Alexei Simanovsky said in June.

“The pace has slowed a bit, but it’s still skewed,” Nabiullina said, according to a Kremlin transcript. “We can’t keep amassing these risks from consumer lending, especially when it’s unsecured, because people don’t always understand the high rates they’ll have to pay.”

Russia is trying to curb dangers from risky lending practices even as the government and central bank seek ways to reduce borrowing costs to bolster the economy, which grew 1.7 percent from a year earlier in the first six months, half last year’s pace. Risks to Russia’s financial stability are rising from “rapid unsecured consumer credit growth,” the International Monetary Fund said June 18.

While the central bank left its main lending rates unchanged for a 10th month July 12, it announced plans to offer 500 billion rubles ($15.4 billion) through a new, one-year instrument backed by non-marketable assets and carrying a floating rate. The move has sent interest rates tumbling.

Swap Costs

The cost to fix borrowing costs in rubles for a year using interest-rate swaps has dropped 55 basis points to 6.65 percent over the past month, data compiled by Bloomberg show. Bank Rossii next meets on rates Aug. 9.

Russia must avert a situation like the mortgage defaults endured by the U.S., according to Putin. “But there also shouldn’t be artificial restraints,” he said today.

While reducing inflation is the “main criterion” to bring down loan costs, it’s not enough, Nabiullina said. Bank Rossii plans to make its lending to banks more effective in boosting the economy, she said.

“Right now the liquidity situation is more or less stable, but we need there to be predictability for banks,” she said. “It’s important to provide the money in a way that won’t lead to higher inflation or to capital outflows.”

To contact the reporters on this story: Scott Rose in Moscow at rrose10@bloomberg.net; Olga Tanas in Moscow at otanas@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.