How the Crisis Affected Foreign Currency Borrowing in CESEE: Microeconomic Evidence and Policy Implications

Micro data collected in the OeNB Euro Survey show that in the aftermath of the global economic and financial crisis, households have come to perceive foreign currency loans as riskier, above all in those Central, Eastern and Southeastern European (CESEE) countries that experienced depreciations during the crisis. Despite this perceived increase in risk, a majority of respondents in six out of nine countries sill regard loans in euro as more attractive than loans in domestic currency. Data about the motives indicate that both supply and demand factors drive foreign currency loans. The mutual interest of banks and households and the still high attractiveness of foreign currency loans suggest that foreign currency borrowing is unlikely to vanish without policy intervention. If foreign currency borrowing were to be curbed in the short run, the only option for policymakers would be the implementation of regulatory and supervisory measures.