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Financial News: Bank Of Slovenia Tightens Norms For Consumer Loans

Bank Of Slovenia Tightens Norms For Consumer Loans

10/09/2019 - 09:29:00 (RTTNews)

(RTTNews) - Bank of Slovenia tightened the standards for consumer loans on Wednesday, citing risks linked to the particular category of lending.

"Risks, linked to household lending, remain high despite our previous actions," the central bank said in a statement.

"Although we warned banks and the public and implemented recommendations regarding maintenance of moderate growth of household loans, it still exceeds 10 percent."

The bank expressed concern over the a high proportion of deviation from its recommendations, mainly in two areas - the ratio between the cost of debt servicing in relation to the borrower's income and the average maturity of consumer loans, which in some cases exceed 12 years.

Hence, the bank changed the recommendation into a binding instrument for household lending.

Consequently, the bank asked banks, including the branches of foreign banks, to limit the ratio of annual cost of debt servicing to the annual net income of the borrower.

The ratio must not exceed 50 percent for borrowers with an income less than 2 times the gross minimum wage, and 67 percent for part of the borrower's income in excess of the said threshold.

The borrower must remain within the net minimum wage after servicing the debt, the bank said.

The bank also decided to limit the maturity of consumer loans to a maximum 7 years.

The central bank retained its recommendation that the loan-to-value ratio for home loans should not exceed 80 percent.

In August, consumer credit grew 11.7 percent year-on-year with a volume of EUR 2.9 billion, which the bank said was fast approaching the pre-crisis levels.

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