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Financial vulnerabilities and debt at risk of CESEE borrowers: a cross-country analysis

Author

Listed:
  • Matthias Enzinger

    (Oesterreichische Nationalbank)

  • Melanie Koch
  • Aleksandra Riedl

    (Oesterreichische Nationalbank, Foreign Research Division)

Abstract

We employ OeNB Euro Survey data to provide an assessment of the financial vulnerability of indebted households in nine Central, Eastern and Southeastern European (CESEE) economies for the first two years of the COVID-19 pandemic (2020 and 2021). Given the considerable exposure of Austrian banking subsidiaries in this region, it is of crucial policy relevance to swiftly identify potential risks stemming from household debt. Against this background, we calculate debt at risk, i.e. the outstanding debt held by financially vulnerable households as a share of overall outstanding household debt in each country, including nonbank debt. To determine which indebted households are vulnerable, we calculate five different indicators of financial vulnerability commonly used in the literature and combine them into one vulnerability index. Using our vulnerability index, we observe considerable heterogeneity across countries with respect to the debt-at-risk level. In six out of nine countries, vulnerable borrowers hold an overproportionate share of debt. Given the ongoing surge in consumer prices and rising interest rates, constant and in-depth monitoring of credit risks is crucially important.

Suggested Citation

  • Matthias Enzinger & Melanie Koch & Aleksandra Riedl, 2022. "Financial vulnerabilities and debt at risk of CESEE borrowers: a cross-country analysis," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 44, pages 25-44.
    • Handle: RePEc:onb:oenbfs:y:2022:i:44:b:1
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    References listed on IDEAS

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    4. Nicolas Albacete & Pirmin Fessler & Maximilian Propst, 2020. "Mapping financial vulnerability in CESEE: understanding risk-bearing capacities of households is key in times of crisis," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 39, pages 71-87.
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    Cited by:

    1. Elena Ellmeier & Melanie Koch & Thomas Scheiber, 2023. "Saving behavior along the income distribution during the COVID-19 pandemic," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue Q1/23, pages 7-21.

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    Keywords

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    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D39 - Microeconomics - - Distribution - - - Other
    • G5 - Financial Economics - - Household Finance
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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