The total exposure of the financial system to systemic risks at the end of the third quarter of 2024 remained at a moderate level, with the most significant risks to financial stability arising from the international environment and related to geopolitical and trade tensions, as well as the slowing growth of the euro area economy, which are notably negative, according to a statement from the meeting of the Council of the Croatian National Bank (HNB) held on Thursday.
In the domestic environment, systemic risks are intensified by strong growth in household lending with mild approval criteria, the statement further notes. It emphasizes that the growth of cash non-purpose loans to households shows signs of stabilization at a very high level, while housing loans are increasing due to the rise in the average loan amount associated with the increase in real estate prices, where Croatia ranks at the top of the EU.
A significant share of new housing and cash loans is being approved with elevated debt-to-income ratios for consumers, the HNB Council noted, adding that HNB has therefore announced the introduction of new macroprudential measures that limit consumer lending criteria with the aim of mitigating risks associated with increased household lending and strengthening their financial resilience in potential adverse macroeconomic scenarios.
In contrast to household lending, corporate lending remains subdued, with new loans primarily directed towards activities related to the real estate market, as assessed by the Council. The profitability of credit institutions remains high, but in the third quarter of 2024, it began to gradually decrease due to the lowering of key interest rates by the ECB and a decline in net interest income.
