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Emerging Europe: Protecting retail borrowers is a job for politicians, not regulators

Stand-off in Slovenia highlights politicians’ failure to tackle retail lending boom.


A shopping street in Ljubljana

How much retail lending growth is too much? It is a question that has been exercising regulators across emerging Europe during the past two years as banks in the region have rushed to offer cash to newly confident and – by developed market standards – underleveraged consumers.

With annual retail growth rates well into double-digits, central bankers from the Czech Republic to Russia have tried to cool markets and reduce over-indebtedness by introducing limits on debt-to-income ratios and loan-to-value mortgages.

These have largely proved uncontroversial. Local banks and real-estate developers have inevitably grumbled, but there has been little popular or political pushback.

The exception is Slovenia.

When the country’s central bank introduced measures to curb retail lending in November, politicians of all stripes joined the banking industry in condemning the move, which they claimed would unfairly deny customers access to credit.


Buoyed by this support, as well as by data compiled by the local banking association showing a sharp drop in consumer and housing lending, national champion NLB in January asked Slovenia’s Constitutional Court to review the measures.

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