In order to preserve the stability of the financial system, the Croatian National Bank has introduced new macroprudential measures to limit the criteria for consumer lending.
The borrower-based measures are an important part of the macroprudential toolbox. They serve as a kind of safety net to mitigate excessive consumer borrowing, i.e. excessive risk-taking by banks, which could lead to loan repayment difficulties and create losses for banks, adversely affecting economic growth and financial stability.
In the Decision on consumer lending criteria, the CNB will limit the ratio of monthly debt service to consumer income (debt service to income, DSTI) to a maximum of 45% for housing loans and 40% for non-housing loans; for housing loans, the ratio of the total loan amount to the value of the real estate serving as collateral (loan to value, LTV) may not exceed 90%. In addition, maturity of housing and non-housing loans is limited to thirty and ten years, respectively. However, up to 20% of housing and 10% of non-housing loans in each quarter may be granted in excess of the said DSTI and LTV limits on the basis of the bank’s own assessment. The exceptions in granting housing loans may largely be used for consumers applying for a loan to address their housing needs.
A public consultation has been launched on the adoption of the new measures, which runs until 20 February 2025.