In order to preserve the stability of the financial system, the Croatian National Bank has introduced new macroprudential measures imposing limits on consumer lending criteria. These preventive measures are introduced to mitigate the build-up of financial stability risks associated with increased lending to households and to strengthen household financial resilience in possible adverse macroeconomic scenarios. The measures, which are scheduled to come into effect on 1 April 2025, are expected to slow down slightly household borrowing, particularly in the segment of general-purpose cash loans, thus mitigating risks to consumers and financial stability associated with strong lending activity. Under the current macroeconomic conditions, which are marked by fast growth in household consumption, these measures also help to reduce inflationary pressures arising from increased demand.

When granting a new loan, the amount of new consumer borrowing is limited as follows:

• the monthly debt service to income (DSTI) ratio may not exceed 45% for housing loans and 40% for non-housing loans;
• the ratio of the housing loan to the value of the real estate serving as collateral (loan to value, LTV) may not exceed 90%.

Also, maturity of housing and non-housing loans is limited to thirty and ten years, respectively.

However, based on their own assessment, banks may grant up to 20% of housing and 10% of non-housing loans in excess of the limits. The exceptions in granting housing loans may largely be used for consumers applying for a loan to address their housing needs. Such exceptions are intended to alleviate the possible adverse impact of the measures on consumers acquiring their first home or home more appropriate to their family circumstances. Also, exceptions allow banks some flexibility when setting credit standards on the basis of a more detailed assessment of a consumer’s creditworthiness. It is noteworthy that banks are still obliged to use their own, as well as additional prescribed, elements to assess the riskiness of loans, taking particular account of regulations governing enforcement of the monetary funds of consumers.

The measures are a response to the risks arising from the strong growth of household loans, which has been accelerating since the beginning of 2023. Some loans are approved with relatively mild criteria, which increases the risk of loan repayment difficulties, with potential unfavourable effects on financial stability. The annual growth rate of general-purpose cash loans accelerated in particular, from 3.6% at the end of 2022 to 15.9% at the end of 2024. The recoverability of these loans deteriorated relatively quickly, so that the share of loans in default in the cohort of general-purpose cash loans granted in 2021 reached approximately 4% by the end of 2023. This indicator might deteriorate further for newer loans, given the much larger volume of granted loans and the expected slowdown in income growth. The segment of housing loans, which has grown at high rates in the last four years (averaging around 10% a year), is also showing indications of higher default risk. Namely, a surge in residential real estate prices and a rise in interest rates have driven consumers to take on increasing amounts of loans, with a growing burden on income arising from debt service expenses and an increasingly longer maturity of loans. The average debt servicing burden increased from 38% of income in 2022 to 41% of income at the end of 2024, while the average maturity of housing loans increased from 22 to 24 years in the same period.

All of the above points to an increase in household vulnerability to possible adverse macroeconomic and financial shocks, such as reduced income or loss of job. To be able to continue repaying their loans under such conditions, households would have to reduce their consumption significantly. They would then experience worse living standards, with a negative impact on overall economic developments, or face loan repayment difficulties, which would expose banks to the risk of losses with possible adverse effects on overall financial stability.

The aim of these macroprudential measures is to harmonise minimum lending criteria across banks and prevent them from becoming too relaxed in a highly competitive market. This will reduce the risk of excessive consumer borrowing, i.e. the possibility that disposable funds remaining after the debt repayment are insufficient to cover basic living costs. The introduction of measures will also have an impact on the reduction of credit-financed consumption, thus easing inflationary pressures. All this reduces the risk of financial imbalances that could destabilise the financial system and adversely affect the economy in the event of macroeconomic or financial disruptions.

The limits on lending criteria are a permanent structural element of the CNB’s macroeconomic policy. The CNB will continue to monitor the impact of the entire set of macroprudential measures and their contribution to preserving the stability of the financial system and long-term sustainable economic growth, protecting the interests of both consumers and banks, and will adapt these measures, if necessary, to the development of systemic risks and general macro-financial circumstances.

On the occasion of the introduction of the new measures, the Croatian National Bank has launched a public consultation on its website, available at Open consultations.