Regional heterogeneity of household lending based on the findings of the household finance survey: regional features and potential risks

According to the household finance surveys conducted in 2013 and 2015, the credit penetration rate varies across federal districts. Differences in credit penetration levels can be partly attributed to the loan demand factors. For example, low credit penetration in the Central Federal District stems from the relatively high level of accumulated net assets (especially as regards liquid assets), which reduces the demand for loans. In Eastern Russia, in districts with comparable income levels and less net assets, high credit penetration rates are primarily attributable to income growth expectations. In these regions, accumulated net assets are generally viewed as a supplement to loans. Analysis of the loan demand model in Southern Russia points out a relatively high level of risk, with loan demand growing despite deterioration of the financial situation (including financial expectations). Low credit penetration in the underperforming districts has largely to do with credit supply constraints as banks factor in higher risks associated with strong gross regional product volatility and job market uncertainties. This means that aggressive loan expansion driven by the growing number of new borrowers in the federal districts with small and volatile incomes and a lower credit penetration rate may threaten the social and financial stability in such regions.