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2021 | OriginalPaper | Chapter

The Poisonous Fruit of Foreign Currency Loans for Consumers in Selected Central European States: The Dilemma for Macroeconomic Policy

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Authors: Jarosław Bełdowski, Wiktor Wojciechowski

Publisher: Springer International Publishing

Published in: Consumer Law and Economics

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Abstract

This chapter is devoted to the analysis of the determinants and shape of public intervention in selected transition CEE countries within the foreign currency loan market through legislative and executive branches of government. The study is limited to three CEE countries that have taken different regulatory paths with extreme (Hungary), moderate (Croatia) and limited approach (Poland). The public authorities in these countries faced a dilemma whether to step into private contractual provisions in order to ease the consumers’ burden or to save the stability of domestic banking sector. We show that the shape of public interventions depended heavily on the situation in which the financial sector and macroeconomic stability were located. The better macroprudential supervision, the smaller the need for intervention after the crisis, because the smaller scale of the problem.

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Dübel and Walley ( 2010), Brown et al. ( 2011), Brown and De Haas ( 2012), Yeşin ( 2013), Brzoza-Brzezina et al. ( 2017).

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It only applied to households that took out a loan at a rate equal to or lower than introduced in 2011.

For instance, determination of the maximum level of debt service costs (depending on the net income of the applicants, it was 50% or 65% respectively); the assessment of the creditworthiness of loans with a variable interest rate the possibility of changing it (estimation individually, based on the analysis of the volatility of market rates); constant monitoring of the level of loan exposure protection by calculating the loan to value level (LtV); using the available databases to make a reliable assessment of creditworthiness; adequate management of retail indices by introducing internal risk-limiting limits, adequate valuation of collateral and stress tests.

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Title

The Poisonous Fruit of Foreign Currency Loans for Consumers in Selected Central European States: The Dilemma for Macroeconomic Policy

Book

Consumer Law and Economics

Print ISBN: 978-3-030-49027-0

Electronic ISBN: 978-3-030-49028-7

https://doi.org/10.1007/978-3-030-49028-7

DOI

https://doi.org/10.1007/978-3-030-49028-7_11

Authors:

Jarosław Bełdowski
Wiktor Wojciechowski

Publisher

Springer International Publishing

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