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Europe > Latvia, Republic of

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Cover IMF Working Papers
Micro-Assessment of Macroprudential Borrower-Based Measures in Lithuania
Mantas Dirma
and
Jaunius Karmelavičius
Despite having introduced borrower-based measures (BBM), Lithuania's housing and mortgage markets were booming during the low-interest-rate period, casting doubt on the macroprudential toolkit's ability to contain excessive mortgage growth. This paper assesses the adequacy of BBMs’ parametrization in Lithuania. We do so by building a novel lifetime expected credit loss framework that is founded on actual loan-level default and household income data. We show that the BBM package effectively contains mortgage credit risk and that housing loans are more resilient to stress than in the preregulatory era. Our BBM limit calibration exercise reveals that (1) in the low-rate environment, income-based measures could have been tighter; and (2) borrowers taking out secondary mortgages rightly are and should be required to pledge a higher down payment.
Keywords:
macroprudential policy; borrower-based measures; LTV; mortgage credit risk; lifetime expected loss; probability of default.; calibration exercise; BBM package; modeling mortgage risk; Lithuania's housing market; Mortgages; Loans; Credit risk; Housing prices; Macroprudential policy instruments; Europe; Baltics; Global
Cover IMF Staff Country Reports
Republic of Latvia: Selected Issues
International Monetary Fund. African Dept.
Selected Issues
Keywords:
term premium; premium in the Baltic; staff team of the International Monetary Fund; nominal NPLS; Latvia's lending rate; Loans; Credit; Big data; Nonperforming loans; Bank credit; Baltics
Cover IMF Working Papers
The Dynamics of Non-Performing Loans during Banking Crises: A New Database
Mr. Anil Ari
,
Sophia Chen
, and
Mr. Lev Ratnovski
This paper presents a new dataset on the dynamics of non-performing loans (NPLs) during 88 banking crises since 1990. The data show similarities across crises during NPL build-ups but less so during NPL resolutions. We find a close relationship between NPL problems—elevated and unresolved NPLs—and the severity of post-crisis recessions. A machine learning approach identifies a set of pre-crisis predictors of NPL problems related to weak macroeconomic, institutional, corporate, and banking sector conditions. Our findings suggest that reducing pre-crisis vulnerabilities and promptly addressing NPL problems during a crisis are important for post-crisis output recovery.
Keywords:
WP; NPL resolution; peak npls; NPL dynamics; elevated npls; NPL ratio; peak NPL; elevated NPL; banking crisis; Nonperforming loans; Banking crises; Loans; Global; Asia and Pacific; Europe
Cover Policy Papers
Collaboration Between Regional Financing Arrangements and the IMF--Background Paper
International Monetary Fund
NULL
Keywords:
PP; reform program; structural adjustment; country; balance of payments; member country; financial support; primary market; exchange rate; central bank; division of labor; Loans; Lines of credit; Fiscal consolidation; Financial sector; Structural reforms; Global; Africa
Cover IMF Staff Country Reports
Republic of Croatia: Selected Issues
International Monetary Fund. European Dept.
This paper mainly examines fiscal decentralization, credit-loss recovery, and unemployment in Croatia. The degree of expenditure and revenue decentralization in Croatia appears limited relative to its peers. At about 16 percent of general government spending, subnational government spending in Croatia is modest compared to other southeastern European countries and to the EU-28 average, and particularly low compared to the most decentralized countries in the EU. Croatia’s recovery since late 2014 has been moderate. Croatia’s recession lasted six years and was thus the longest among the new EU member states. Croatia’s structural and cyclical unemployment rates are very high, at about 11.5 percent and 5 percent respectively in 2015.
Keywords:
ISCR; CR; government; local government; wage; cyclical unemployment unemployment rate; unemployment trap; Subnational government; government structure; city authorities; reservation wage; Unemployment rate; Unemployment; Public employment; Nonperforming loans; Wages; Central and Eastern Europe; Global
Cover Staff Discussion Notes
A Strategy for Resolving Europe's Problem Loans
Mr. Shekhar Aiyar
,
Mr. Wolfgang Bergthaler
,
Jose M Garrido
,
Ms. Anna Ilyina
,
Andreas Jobst
,
Mr. Kenneth H Kang
,
Dmitriy Kovtun
,
Ms. Yan Liu
,
Mr. Dermot Monaghan
, and
Ms. Marina Moretti
Europe’s banking system is weighed down by high levels of non-performing loans (NPLs), which are holding down credit growth and economic activity. This discussion note uses a new survey of European country authorities and banks to examine the structural obstacles that discourage banks from addressing their problem loans. A three pillared strategy is advocated to remedy the situation, comprising: (i) tightened supervisory policies, (ii) insolvency reforms, and (iii) the development of distressed debt markets.
Keywords:
SDN; book value; unsecured debt; expected return; profit sharing; NPL ratio; NPL resolution; bank capitalization; area bank; real GDP; bank profitability; capital buffer; Nonperforming loans; Distressed assets; Loans; Solvency; Debt restructuring; Europe; Global
Cover IMF Working Papers
Does Supply or Demand Drive the Credit Cycle? Evidence from Central, Eastern, and Southeastern Europe
Greetje Everaert
,
Ms. Natasha X Che
,
Ms. Nan Geng
,
Bertrand Gruss
,
Gregorio Impavido
,
Miss Yinqiu Lu
,
Christian Saborowski
,
Mr. Jerome Vandenbussche
, and
Mr. Li Zeng
Countries in Central, Eastern, and Southeastern Europe (CESEE) experienced a credit boom-bust cycle in the last decade. This paper analyzes the roles of demand and supply factors in explaining this credit cycle. Our analysis first focuses on a large sample of bank-level data on credit growth for the entire CESEE region. We complement this analysis by five case studies (Latvia, Lithuania, Montenegro, Poland, and Romania). Our results of the panel data analysis indicate that supply factors, on average and relative to demand factors, gained in importance in explaining credit growth in the post-crisis period. In the case studies, we find a similar result for Lithuania and Montenegro, but the other three case studies point to the fact that country experiences were heterogeneous.
Keywords:
WP; credit growth; demand and supply; credit demand; credit supply; parent bank; Credit; Eastern Europe; Disequilibrium Model; bank characteristic; excess supply; asset quality; excess demand; credit to household; demand and supply factor; bank funding; demand development; Consumer credit; Credit booms; Loans; Bank credit; Global; Baltics
Cover IMF Staff Country Reports
Former Yugoslav Republic of Macedonia: Selected Issues Paper
International Monetary Fund. European Dept.
The Macedonian labor market exhibits a high unemployment rate, yet does not demonstrate obvious and large enough constraints on the demand or supply side. Considerable achievements can be made by maintaining macroeconomic stability, attracting FDI, and closing the educational gaps. The second paper assesses ways in which the Macedonian financial sector could better contribute to growth and real convergence, taking stock of where the sector stands and its recent developments. Streamlining bankruptcy procedures, improving collateral and systematic collection and publication of real estate sales data, and revisiting the interest rate cap may serve to moderately boost credit supply.
Keywords:
ISCR; CR; bank; wage; financing; labor market; credit growth; reservation wage; private sector; Macedonian bank; financing model; credit supply; brain drain; equilibrium credit level; Credit; Wages; Commercial banks; Labor markets; Global; Eastern Europe; Europe; Central and Eastern Europe; Central Asia
Cover IMF Staff Country Reports
Greece: 2013 Article IV Consultation
International Monetary Fund. European Dept.
Fiscal expansion after euro accession led to a buildup of large economic imbalances, and a program to make fiscal policy and the fiscal and debt position sustainable was initiated. However, the program saw opposition from the outset and structural reforms stalled, which unsettled the investment climate. The Greek government’s determination to push ahead with reforms has seen progress in fiscal adjustment and perseverance of the financial sector. However, the social cost of the recession has been very high, and the current program can only succeed if policymakers address the root causes.
Keywords:
ISCR; CR; government; debt data revision; State lottery; deficit; recession; undue government interference; staff analysis; authorities' official; fund staff; Fiscal consolidation; Credit; Loans; Europe; Global
Cover IMF Staff Country Reports
Greece: Selected Issues
International Monetary Fund. European Dept.
Rigidities in Greece’s product and labor markets leading to economic imbalances and the significance of reforms to these markets are played out in the first paper. The second paper describes the problems, progress to date, and agenda for work in Greece’s revenue administration and how this effort has been achieved primarily by raising tax rates to high levels and reducing wages, pensions, and other spending. The third paper is on the need for designing and implementing debt restructuring frameworks as well as improving banks’ loan resolution practices so that Greece’s banks are positioned to support the economic recovery.
Keywords:
ISCR; CR; product market; labor market; firm; Greece; product market reform; adjustment cost; revenue administration; flexibility indicator; labor market reform; administration reform; Credit; Commodity markets; Nonperforming loans; Tax administration core functions; Global; Eastern Europe; Baltics