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BANKING

According to the latest Financial Stability Report
of the National Bank, the credit approval rate for
households is on the historically highest level in
the last five years and equals 84.2%, which in simpli-
fied terms means that banks approve approximately
6 out of 7 received loan applications

concentrated exactly with this segment of tion of impairment, should not be regard-
the population. This is confirmed by the ed as a value in a given point in time, but
movement of the indicator for the repay- as an average over the whole credit cycle,
ment of interest and principal in the to- given that it should reflect the average
tal disposable income of the households. production of bad loans in a time horizon
Namely, this indicator registers a continu- of several years.
ous upward trend and in the last six years
it has increased by 2.2 percentage points, When discussing the risks associated
from 6.9% to 9.1%. with loans to households, one must take
into consideration also the non-linear in-
In terms of the structure, although in herent credit risks, i.e. the risks arising
the last two years it has changed in fa- from adjustable interest rates and curren-
vor of home loans, still predominant in cy risks arising from loans in foreign cur-
the banks‘ portfolios are consumer loans, rency and in denars with FX clause. In fact,
credit cards and overdrafts on transaction 75% of the loans are with an adjustable in-
accounts. These forms of credit exposure terest rate, and 46.3% are loans in denars
account for 73% of the total credit expo- with FX clause and plain foreign currency
sure at the end of the first quarter of the loans. In case of significant changes in the
year and create 27.5% of the total annual interest rates or change in the exchange
growth of banks‘ credit exposure. The rate, these induced risks could materialize
majority, or more than 2/3 of these loans in future credit losses. In addition, part of
are uncollateralized. Non-performing the risks associated with the household
consumer loans account for 6.5% of total loans is also the continuous extension of
consumer loans. Although the rate of non- their maturity. In the last five years, the
performing loans has registered a slight average maturity of household loans was
decline in the past two years, there is a extended from eight years to nine years
new production of bad loans, the volume and three months. Other indirect risks,
of which may not represent a worrying fac- which banks are required to measure and
tor at the moment, but they should not be analyze at the level of a loan portfolio, are
neglected. On a positive note, as a result of the impact of macroeconomic risks, and
the more dynamic lending to households, the risks associated with the employers
the National Bank calculations show that i.e. the sources of income of the household
the probability of default of households to sector from which the main risk of non-
banks in the past two years has registered repayment of loans arises.
a declining tendency. So, from 4% as this
rate amounted in 2012, at the end of last In fact, there is actual room for further
year it was reduced to 2.6% (as measured growth of household loans, but in a long
by the number of credit agreements). This run this growth should not be driven by ex-
rate, however, in accordance with recent cessive and continuous easing of the stan-
changes in the standards for the calcula- dards for undertaking credit risk, primar-
ily motivated by competition.

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