The new HNB Podcast episode deals with the CNB’s macroprudential measure limiting consumer lending criteria, which comes into effect on 1 July. These limits, an important part of the CNB’s macroprudential toolbox, provide a kind of safety net curbing excessive consumer borrowing and excessive risk-taking by consumers and banks.
Sections:
01:06
The CNB limits the ratio of monthly debt service to consumer income to a maximum of 45% for housing loans and 40% for non-housing loans, while for all loans collateralised by real estate the ratio of the total loan amount to the value of the real estate serving as collateral may not exceed 90%.
02:36
Different minimum approval criteria for housing loans and other loans are based on a different risk assessment of these two loan groups. Housing loans, which are secured by real estate, have historically shown a much higher degree of recoverability, even in stress periods.
03:47
The CNB’s measures seek to prevent any excessive loosening of lending criteria. The measures serve as a kind of safety net to limit excessive consumer borrowing and excessive risk-taking by banks.
09:45
Total debt includes all consumer’s outstanding liabilities towards banks from previously contracted loans, including a new loan the consumer intends to take, as well as any debt incurred by the use of current account overdrafts or credit card loans.
10:45
The several-year decline of relative household debt has been halted by strong credit growth, so that this debt could now start to grow amid an expected slowdown in income growth and continued credit growth. In addition, a large share of new loans have been granted under relatively lenient criteria and have longer average maturity, which increases the risk of default during loan repayment.
14:40
Macroprudential policy measures are primarily focused on preserving the stability of the financial system as a whole. However, the expected slowdown of general-purpose loans under the conditions of intensified household consumption will reduce credit-financed spending and, in turn, ease inflationary pressures associated with increased demand.
16:17
The CNB’s macroprudential policy aims to preserve banking sector stability and the stability of the overall economy. This is achieved by strengthening banks’ resilience to potential financial shocks and by taking other measures to alleviate systemic risks.
17:36
The CNB is currently implementing a number of macroprudential measures to preserve the stability of the financial system and alleviate risks related to excessive household borrowing. These measures have been developed and adjusted over the years, depending on changes in the economic environment and the level of financial risks.