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.
Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.
The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.
Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.
For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.
Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.
The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.