The Agency for Regulation and Development of the Financial Market (ARDFM) has launched regular checks on the correctness of calculating the debt burden ratio (DBR) in the country's 11 largest banks. This was reported by Qazaqyia.kz citing Kursiv Media.

Recall that DBR is the ratio of a person's monthly payments on all loans to their average monthly income. Its maximum value is set at 0.5. Consequently, payments on all loans of a Kazakhstani citizen must not exceed half of their monthly income.

«The Agency for Regulation and Development of the Financial Market announces the launch of a regular supervisory process Debt Service Review (DSR), aimed at checking the correctness of calculating the debt burden ratio of bank borrowers. The perimeter of the check will include 11 large banks. The new supervisory process is aimed at maintaining a balanced level of debt burden of citizens and strengthening the practice of responsible lending,» the published statement says.

According to existing rules, with an income of 500 thousand tenge, the loan payment should not exceed 250 thousand tenge. Now the ARDFM is beginning to systematically monitor how honestly and correctly banks assess the debt burden of clients.

The agency stated that ensuring responsible lending and protecting citizens from excessive debt burden are among the priority areas of the ARDFM's activities.

In the context of growing retail lending, an objective assessment by banks of borrowers' solvency at the stage of making a decision to issue a loan is of particular importance, they believe.

The launch of the new supervisory process was preceded by a pilot project, within which the agency analyzed the correctness of DBR calculation in eight banks.

«The results of the pilot project confirmed the need to introduce DSR into the regular supervisory process,» the ARDFM said.

The main goals of DSR were named by the agency as:

  • 01checking the correctness of calculating the debt burden of borrowers;
  • 02maintaining a balanced level of debt burden of citizens;
  • 03strengthening the practice of responsible lending.

Based on the results of the checks, the ARDFM will assess the nature and significance of the identified violations and consider the need to apply supervisory measures, as well as approve corrective action plans by banks. The results obtained will be used in preparing proposals for improving regulatory requirements for DBR calculation.

«DBR reflects the ratio of the borrower's monthly payments on credit obligations to their average monthly income. This is one of the key regulatory tools for limiting the debt burden of the population,» the agency recalled.

The correct calculation of this indicator allows an objective assessment of the borrower's ability to service both existing obligations and a new loan, the statement notes. Underestimating the debt burden of borrowers increases the credit risks of banks and the risks of increasing debt burden of the population, the ARDFM believes.