Stress-testing croatian households with debt -- implications for financial stability
The purpose of this paper is to stress test the resilience of Croatian households with debt to economic shocks. The shocks not only impact a household's welfare, but also increase the probability of loan default. As a result, there is a direct link between these stress-testing exercises and financial stability risks. The authors find that very few households are at risk as a result of the shocks experienced over the past few years; new vulnerable households represent about 2 percent of all households, 6 percent of households with debt, and 2-3 percent of aggregate banking system assets. This suggests that household over-indebtedness in Croatia is unlikely to become a drag on aggregate economic activity and that financial stability risks remain manageable. One caveat should be noted. Some 27-31 percent of households with debt, representing 8-9 of banking system assets, are vulnerable even before being subjected to an economic shock. Since NPLs were low before the global financial crisis, it can be argued that banks knew something about some of these households that is not captured by household budget surveys. It follows that the calculations in this paper should primarily focus on the increased vulnerability of households as a result of shocks and are likely to represent an upper bound to the financial stability risks faced by Croatia on account of household indebtedness.
|Date of creation:||01 Dec 2011|
|Date of revision:|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Evan Kraft, 2007. "The Boom in Household Lending in Transition Countries: A Croatian Case Study and a Cross-Country Analysis of Determinants," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 49(3), pages 345-366, September.
- Nicolas Albacete & Pirmin Fessler, 2010. "Stress Testing Austrian Households," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 19, pages 72-91.
- Sugawara, Naotaka & Sulla, Victor & Taylor, Ashley & Tiongson, Erwin R., 2010.
"The Crisis Hits Home: Stress-Testing Households in Europe and Central Asia,"
World Bank - Economic Premise,
The World Bank, issue 12, pages 1-4, May.
- Erwin R. Tiongson & Naotaka Sugawara & Victor Sulla & Ashley Taylor & Anna I. Gueorguieva & Victoria Levin & Kalanidhi Subbarao, 2010. "The Crisis Hits Home : Stress-Testing Households in Europe and Central Asia," World Bank Publications, The World Bank, number 2396.
- Naotaka Sugawara & Victor Sulla & Ashley Taylor & Erwin R. Tiongson, 2010. "The Crisis Hits Home : Stress-Testing Households in Europe and Central Asia," World Bank Other Operational Studies 10185, The World Bank.
- World Bank, 2010. "Croatia : Social Impact of the Crisis and Building Resilience," World Bank Other Operational Studies 2903, The World Bank.
- Fabian Valencia & Luc Laeven, 2008. "Systemic Banking Crises; A New Database," IMF Working Papers 08/224, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:5906. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.