New edition of Banking Code shed light on loans interest rates
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.
The Belarusian authorities regard the Catholic conference as yet another international event to promote Minsk as a global negotiating platform. Minsk’s proposal to organise a meeting between the Roman-Catholic Church and the Russian Orthodox Church is rather an image-making undertaking than a serious intention. However, the authorities could somewhat extend the opportunities for the Roman-Catholic Church in Belarus due to developing contacts with the Catholic world.
Minsk is attempting to lay out a mosaic from various international religious, political and sportive events to shape a positive image of Belarus for promoting the Helsinki 2.0 idea.
Belarus’ invitation to the head of the Holy See for a meeting with the Patriarch of the Russian Orthodox Church should be regarded as a continuation of her foreign policy efforts in shaping Minsk’s peacekeeping image and enhancing Belarus’ international weight. The Belarusian authorities are aware that their initiative is unlikely to find supporters among the leadership of the Russian Orthodox Church in Moscow. In Russia, isolationist sentiments prevail.
In addition, for domestic audiences, the authorities make up for the lack of tangible economic growth with demonstrations of growth in Minsk’s authority at international level through providing a platform for religious, sportive and other dialogues.