Use of loan moratoria by CESEE households: who are the users and how vulnerable are they?

Loan repayment moratoria were widely used during the COVID-19 pandemic to mitigate liquidity problems in the private sector and thus rapid asset quality deterioration in the banking sector. We provide novel, comparable survey evidence on the use of moratoria by households in ten Central, Eastern and Southeastern (CESEE) countries. In countries where eligible borrowers had to opt in to use moratoria, i.e. qualify and apply, 14% of borrowers did so on average; in countries where borrowers had to opt out, i.e. take action not to make use of automatically applied moratoria, take-up was 55% on average. We find that for opt-in moratoria, the main determinant of take-up is the degree to which borrowers’ finances were affected by the pandemic. Moratorium take-up is also strongly affected by the extent of indebtedness, particularly in opt-out countries. Using information on loan arrears, we show that individuals who had exited from their moratoria by fall 2020 were not more likely to be in arrears than those who never used moratoria. However, these results probably constitute the lower bound for loan defaults that may occur once all moratoria have expired. After all, we also find that borrowers whose moratoria were still active in fall 2020 were subject to more adverse shoc