“Despite a relatively low level of private debt, and (still) high system-wide resilience to potential shocks, fast credit expansion could result in financial imbalances. This paper reviews current credit conditions and household indebtedness, and explores the need for tightening the macroprudential stance. It proposes a set of additional supervisory measures that would build on steps taken by the National Bank of Slovakia (NBS) and guard against adverse impacts on financial stability and the housing market from rapid credit growth. In particular, fast credit growth relative to historical trends suggests that raising the counter-cyclical capital buffer (CCB) might be warranted in the near term. Macroprudential measures also could usefully be supported through fiscal and regulatory policies related to the housing sector” says a IMF paper
on Slovak Republic.
The paper also notes that “While lending to non-financial corporate has declined in the wake of the financial crisis, there has been a continued rapid expansion of bank lending for housing, which increased at an average rate of about 13 percent over the last five years and now represents almost 45 percent of total lending. Banks’ exposure to the residential real estate sector is growing fast, with over 75 percent of household lending allocated to house purchases.”