Estimating Macro DSTI for Selected EU Countries

The debt service-to-income ratio represents a critical indicator of retail credit risk. While the calculation of this ratio is straightforward for individual retail clients, obtaining it at the country level presents a more significant challenge. Nevertheless, such a measure can provide early warning signals and can help explaining household consumption throughout the credit cycle. Furthermore, the macro DSTI enables a comparison of debt burden across countries. In this paper we estimate the annual and quarterly ratio of debt service-to-income, or Macro DSTI, for selected EU countries. We make several adjustments to currently available comparable indices, like the Debt Service Ratio calculated by the BIS. The estimation of the index solely for indebted households, with the inclusion of their net income, enables a more accurate reflection of the actual debt service burden at the country level. While the majority of countries observed a decline or stagnation in macro DSTI following the Great Financial Crisis, Slovakia exhibited a notable increase, with a decline starting in 2018 resulting from a reduction in consumer loans.