| Tightening up | |
| Steps taken to deal with rapid credit growth by Balkan countries | |
| Measures taken | Countries |
| Macroeconomic policies | |
| Monetary tightening (interest rate hikes and increase in reserve requirements) | Bosnia, Bulgaria, Romania, Serbia |
| Foreign exchange liquidity requirements | Croatia |
| Fiscal tightening | Bulgaria, Croatia, Romania |
| Prudential and supervisory policies | |
| Tightening of regulations and supervision (higher/differentiated capital requirements, tighter loan classification and provisioning); tighter collateral rules; lower loan-to-value ratios | Bosnia, Bulgaria, Croatia, Romania, Serbia |
| Regulations for banks to strengthen risk management and internal controls | Romania |
| Administrative measures | |
| Credit controls (marginal reserve requirement for banks exceeding a certain level of credit growth) | Bulgaria |
| Direct credit controls (requirement to purchase central bank securities at below market rates when loan portfolio exceeds a certain level of credit growth; marginal reserve requirement on foreign borrowing) | Croatia |
| Postponement of FX liberalization measures | Romania |
| Moral suasion | Bulgaria |
| Strengthening risk awareness | |
| Market development measures (credit registry, wider information base) | Bulgaria, Romania |
| Source: Hilbers, Okter-Robe, Pazarba_io_lu, and Johnsen (2005) | |
IT’S A CLASSIC dilemma facing any fast-growing developing economy.
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