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

Matthias Enzinger, Melanie Koch () and Aleksandra Riedl ()
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Aleksandra Riedl: Oesterreichische Nationalbank, Foreign Research Division

Financial Stability Report, 2022, issue 44, 25-44

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.

Keywords: financial vulnerability; debt at risk; household overindebtedness; CESEE (search for similar items in EconPapers)
JEL-codes: D14 D39 G5 O52 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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