The National Bank of Ukraine (NBU) will raise the risk weight for unsecured consumer loans from 125% to 150% from January 1, 2022, the central bank’s press service reported on Friday.
The changes will help banks create an adequate capital cushion to cover unexpected losses from the deterioration in the quality of their unsecured consumer loan portfolio.
In addition, the resolution is intended to increase the lenders’ resilience to potential crisis phenomena, in particular, to stimulate proper consideration of both the advantages and risks of working in this segment.
The press service said that now, for every UAH 10 of the loan, the bank shall keep UAH 1.50 of regulatory capital.
In addition, from the beginning of the year, the NBU will introduce minimum requirements for capital coverage of operational risk in the amount of 50% of the estimated amount, with an increase to 100% from January 1, 2023.
The NBU also increased the risk weights on government bonds in foreign currency to 50% with a subsequent increase to 100% from July 1, 2022. To gradually bring domestic requirements in line with international standards, the risk weight is increased in stages and only for those securities that banks buy from April 1, 2021.
Also, the regulator will increase from the current 25% to 50% the share of the cost of noncore assets deducted from fixed capital.
This requirement to deduct the value of noncore assets from the fixed capital of banks is intended to induce banks to more actively release balance sheets from illiquid assets, which for the most part do not generate income, but are often reflected at an inflated value. The total impact of the planned changes on the banks’ fixed capital adequacy will amount to 2.5 percentage points, the NBU said in the report.
