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The Target Opportunity Costs of Successful Nudges Read chapter Read first chapter

2021 | OriginalPaper | Chapter

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

Authors : Jarosław Bełdowski, Wiktor Wojciechowski

Published in: Consumer Law and Economics

Publisher: Springer International Publishing

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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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Footnotes
1
Dübel and Walley (2010), Brown et al. (2011), Brown and De Haas (2012), Yeşin (2013), Brzoza-Brzezina et al. (2017).
 
2
Gordon (2000).
 
3
Dübel and Walley (2010).
 
4
Political economy is focused on the distribution of benefits from economic activity, especially who gains and who loses from a particular policy or reforms. For surveys of the relevant literature see e.g. Rodrik (1996) or Drazen (2000).
 
5
The concept of ‘least cost avoider’ has been introduced into Law & Economics in its beginning and it could be summarized generally that it is focused on the burden of responsibility which is shifted towards the party which could prevent an accident at the lowest cost. For further reading see Calabresi (1970). See also Gilles (1992). Critically Dari-Mattiacci and Garoupa (2009), Carbonara et al. (2016).
 
6
Corrales and Imam (2019).
 
7
Kolasa (2016).
 
8
Beckmann et al. (2015).
 
9
Dalgic (2018).
 
10
Galac and Kraft (2010).
 
11
Buszko and Krupa (2015) and Novák and Vámos (2017).
 
12
Olszewska (2018).
 
13
Wośko (2013).
 
14
It only applied to households that took out a loan at a rate equal to or lower than introduced in 2011.
 
15
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.
 
16
The comprehensive discussion about the key conditions that have to be met in order to achieve successful debt households’ restructuring is laid out for example in Laeven and Lareya (2009) or Baudinio and Yun (2017).
 
17
Laeven and Lareya (2009).
 
18
Liu and Rosenberg (2013).
 
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Metadata
Title
The Poisonous Fruit of Foreign Currency Loans for Consumers in Selected Central European States: The Dilemma for Macroeconomic Policy
Authors
Jarosław Bełdowski
Wiktor Wojciechowski
Copyright Year
2021
Book
Consumer Law and Economics

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

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

Copyright Year: 2021

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