New edition of Banking Code shed light on loans interest rates

April 22, 2016 18:24

Banks have used loopholes in the law to misinform borrowers about the final interest rate on loans. Sometimes financial illiteracy resulted in conflict situations about the paid interests. The new edition of the Banking Code eliminates this shortcoming, and banks will have to review their final mortgage interest rates.

On January 22nd, amendments to the Belarus’ Banking Code took effect. The amendments hold the banks liable to disclose the overall interest rate on loan agreements.

On the consumer credit market there was a situation when banks would hide the final interest rate on loans, masking it with large commissions against the background of low loans’ base rate. Banks that specialized in retail consumer loans (Delta Bank, HKbank, Trust Bank, SOMBelBank) set the base rate at 20-30% per year, while the final interest rate, taking into account sales charges, could be as high as 140-150% per annum.

The National Bank obliged the banks to disclose the overall interest rate on loan agreements. Poor financial literacy of the population often resulted in an incorrect financial assessment of the loans, leading to conflicts, which required intervention by National Bank experts following written appeals. Many nationals found themselves in a difficult financial situation due to the non-existence of the bankruptcy institute for private persons.

On January 22nd, the amendments to the Belarusian Banking Code took effect. Its article 137 “Loan Agreement” has been revised and any levy of additional charges (fees and other) on loans has been banned. According to the new rules, banks must inform about the full interest rate on loans. Banks still have some room for manoeuvre to include additional charges, but in the case of abuse, National Bank specialists may intervene to prevent further conflicts. 

Thus, the consumer loans market will undergo some changes. On the one hand, banks are no longer allowed to mask high interest rates on short loans, which will reduce the overall interest rates on consumer loans. On the other hand, consumers will be able to assess their financial capabilities and their needs in loans based on real interest rates. A number of banks may lose significant profits and will have to diversify their loan portfolio and loan products to continue operations in Belarus.

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The Belarusian authorities have launched a discussion on the moratorium or abolition of the death penalty under the pressure of Belarusian human rights activists and international community. Apparently, the authorities are interested in monitoring public sentiments and response to the possible abolition of the capital punishment. The introduction of a moratorium on the death penalty would depend on the dynamics in Belarusian-European relations, efforts of the civil society organisations and Western capitals.

In Grodno last week, the possibility of abolishing the death penalty in Belarus or introducing a moratorium was discussed.

The Belarusian authorities are likely to continue to support the death penalty in Belarus. During his rule, President Lukashenka pardoned only one person, and courts sentenced to death more than 400 people since the early 1990s. Over the past year, Belarusian courts sentenced to death several persons and one person was executed.

There are no recent independent polls about people’s attitude about the death penalty in Belarus. Apparently, this issue is not a priority for the population. In many ways, public opinion about the abolition of the death penalty would depend on the tone of the state-owned media reports.

That said, the Belarusian Orthodox Church and the Roman-Catholic Church stand for the abolition of the capital punishment, however their efforts in this regard only limit to public statements about their stance. Simultaneously, the authorities could have influenced public opinion about the death penalty through a focused media campaign in the state media. As they did, for example, with the nuclear power plant construction in Astravets. Initially unpopular project of the NPP construction was broadly promoted in the state media, and eventually, according to independent pollsters, was accepted by most population.