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Amended rules for making portfolios of similar loans
Practical Law Legal Update 8-501-4899 (Approx. 2 pages)
Amended rules for making portfolios of similar loans
by White & Case LLP
| Published on 17 Feb 2010 • Russian Federation |
This article is part of the PLC Global Finance February 2010 e-mail update for the Russian Federation.
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The Central Bank has issued a Directive providing that credit organisations must establish provisions to cover possible losses arising out of operations with financial instruments, including for portfolios of similar loans.
On 4 December 2009, the Central Bank issued Directive No. 2355-U amending its Regulation No. 254-P "On the Formation of Provisions by Credit Organisations to Cover Potential Losses in Loans, Loan Indebtedness and Other Similar Indebtedness," dated 26 March 2004.
The Directive entered into force on 28 December 2009.
The Directive amends Central Bank Regulation No. 254-P, which provides that credit organisations must establish provisions to cover possible losses arising out of operations with financial instruments (for example, loans granted by such organisations). The provisions may be established for portfolios of similar loans.
The amendments provide that, among other things, loans granted to individuals may be included in a loan portfolio if both:
- The amount of the loan does not exceed RUB1 million, or RUB6 million for housing mortgage loans.
- The borrower's financial position is at least "average".
These loans may be kept in the portfolio even if the borrower's financial position worsens. This rule also applies to loans granted to small and medium businesses.