Romania

Financial Sector Assessment Program-Technical Note on Calibration of a Debt-Service-to-Income Limit in Romania-Evidence from Microdata

This Technical Note discusses calibration of a debt-service-to-income (DSTI) limit in Romania. The recent pickup in household credit in Romania has prompted revisiting the design of existing macroprudential tools addressing household vulnerabilities. The National Bank of Romania is considering a redesign of its existing macroprudential tool related to household indebtedness, including expanding its scope to cover all household loans. Analysis of loan-level data from the Central Credit Register suggests that a borrower’s probability of default is highly sensitive to changes in the DSTI at DSTI ratios of about 50 percent, particularly for mortgage loans. It is recommended that a limit be set such that loans do not exceed this sensitivity threshold.
Publication date: June 2018
ISBN: 9781484360682
$18.00
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