OREANDA-NEWS. December 22, 2008. The Bank of Russia will soften bank reserve standards for all loans. “The board of the Bank of Russia has approved the draft regulation to specify the provisions of credit risk on loans” – Deputy Head of Bank Regulation and Supervision Department of CBR Vladimir Chustyukhin told journalists. According to him, the new standards contain three components. First, he noted that the deadline is extended for borrower evaluation in terms of debt servicing.

“At present, a provision is in place whereby a loan is classified as “good” when a delay in payment does not exceed 5 days for legal entities and 30 days for individuals” – he said. Now CBR has extended the deadline for classifying a loan as “good “to 60 days for individuals and 30 days for legal entities. According to Chistyukhin, a limited period of delay is also extended for classifying loans as “average” or “bad”. Specifically, debt servicing is classified as “average” with delays not exceeding 90 days for legal entities and 120 days for individuals and “bad” with delays of 90 days for legal entities and 120 days for individuals.

 In addition, according to the deputy head of CBR’s department, the quality of servicing relates both to payment of interest and principal as both cases can be at issue or just one of them. The second specific feature of credit risk evaluation, according to Chistuykhin, is that debt restructuring will not impair its quality as is automatically the case today. However, in such case the bank itself should adopt a decision on credit restructuring, assessing the financial standing of a borrower. In addition, the Bank of Russia will assess issuing new loans to repay old ones in a new way and this will not impair portfolio quality. “However, we’re talking about the quality of debt servicing rather than the financial standing of a borrower” – said the Deputy Head of Department of the Bank of Russia.