Russia's central bank said on Monday it would tighten the rules for collateral-free lending, as part of an earlier-announced move to reduce the use of such loans now that the banking system is looking healthier. "We have made the rules more strict, by reducing the limits (on how much can be borrowed) by each group of banks and by correcting the (minimum required) rating level," the central bank's first deputy chairman Alexei Ulyukayev told reporters.
The new rules will be effective from February 1, 2010, the central bank said in a statement. Some 70 domestic banks will no longer be eligible for collateral-free loans as a result of the decision, Ulyukayev estimated. On the ratings front, only requirements for ratings by three of Russia's domestic ratings agencies are affected, while rules for international agencies' credit ratings remain unchanged.
The central bank expects the enforcement of the new rules to coincide with a forecast increase in general level of liquidity in the banking sector and an improvement on the money market. "That is why it will not have an unfavourable influence on the functioning of the financial sector," it said. Last week, the central bank said that domestic banks repaid nearly 650 million roubles ($22.67 million) of collateral-free loans ahead of schedule in the third quarter.
The central bank said that outstanding loans as of November 11 stood at 229 million roubles, down from 1.92 billion in February. On Monday the demand for the collateral-free loans remained relatively high, with the central bank lending all of the available 5 billion roubles in three-month loans. That, however, is still only a fraction of the amounts the bank loaned at the height of the crisis in late 2008, when banks' claimed as much as 300 billion roubles in collateral-free funds at each auction.