The Bank of Russia is proposing a clear shift in how problem debts are handled by lenders, aiming to curb the practice of moving doubtful receivables from one borrower to another. A draft amendment to the regulation governing provisions for expected credit losses outlines new criteria that will influence how loan portfolios are assessed when risk changes. This move reflects an intent to improve the transparency of credit risk and ensure a more accurate reflection of the true quality of loan service in financial reports and regulatory filings. Analysts note that the proposal signals a broader push to tighten the visibility of vulnerabilities within banks’ balance sheets, reducing the opportunity for artificial improvements in reported asset quality through debt transfers. (Source: Bank of Russia)
Under the proposal, a loan service cannot be deemed satisfactory if the debt has been reassigned to another party, except in specific circumstances where payments have been received punctually and in full within the preceding 360 days. The rule is designed to deter opportunistic transfers that mask underlying delinquency or rising credit risk. In practical terms, lenders would need to prove sustained, timely payments across a substantial recent period before a transfer could be considered neutral in terms of service quality. This aims to ensure that the history of borrower performance remains a true indicator of ongoing risk rather than a tactical shift in ownership. (Source: Bank of Russia)
When a debt transfer occurs as part of a loan restructuring, the service quality would be treated as inadequate under the new approach. The change seeks to close gaps where restructurings are used to obscure the real state of credit risk, forcing banks to confront impaired assets rather than relegating them through transfers. The overarching goal is to prevent the concealment of weak asset quality behind a reallocation of receivables and to promote more consistent, conservative risk reporting across the sector. (Source: Bank of Russia)
The amendments also introduce a clarification: modifications to lending terms that align with legal requirements and regulatory guidance should not automatically be deemed restructurings. By separating legitimate adjustments from formal restructurings, the framework lowers regulatory friction for banks while preserving the integrity of the credit risk assessment. The intention is to streamline compliance processes where changes to loan terms reflect lawful responses to credit conditions rather than strategic attempts to reclassify risk. In this context, banks would observe a clearer distinction between routine amendments and genuine restructurings, facilitating more precise capital and provisioning decisions. (Source: Bank of Russia)
Industry observers note that the timing of the policy proposal precedes a broader recalibration of supervisory expectations. The regulator has signaled that, ahead of implementing these changes, banks should prepare for a transitional period during which existing practices will be evaluated and aligned with the new standards. The draft amendments are positioned as part of a wider effort to strengthen risk discipline and to safeguard the resilience of the financial system. In practical terms, this could mean more rigorous documentation, enhanced monitoring of payment histories, and a heightened emphasis on the quality of loan portfolios across banks operating in Russia and internationally connected markets. (Source: Bank of Russia)
Alongside these changes, references to anti-fraud initiatives and guardrails against fraudulent structures remain in focus. The broader policy environment has already seen the creation of criteria aimed at countering financial pyramids and protecting market participants from deceptive schemes. The current draft amendments fit into this overarching strategy by reinforcing prudent lending practices and encouraging lenders to maintain strong, fact-based assessments of credit risk rather than relying on mechanical repositioning of debt. For stakeholders, the message is clear: risk transparency matters, and the industry should expect a tighter, more accountable framework for evaluating and reporting loan performance. (Source: Bank of Russia)