Do regulatory stringency and household indebtedness affect financial stability? An analysis of the market for non-bank lending institutions in selected Central and Eastern European countries

Krzysztof Waliszewski

Poznań University of Economics and Business

Paweł Niedziółka

SGH Warsaw School of Economics


Abstract

The aim of the paper, which provides a comparative analysis of the regulatory framework for non-bank lending institutions in 12 CEE countries, is to answer 2 questions: (a) is the level of household indebtedness a sufficient indication that consumer credit risk is considered important for financial stability?; and (b) is the level of stringency of supervisory regulation of non-bank lending institutions related to financial stability risk? The conducted analysis leads to a conclusion that the stringency of regulations on the operation of non-bank lending institutions does not affect risks arising from the economic and financial performance of lenders, and that the level of household indebtedness is not closely related to the quality of portfolios of non-bank lending institutions. Of key importance, from the point of view of financial stability and the fulfillment of the role of non-bank lenders as institutions supporting the credit inclusion process, is the quality of the credit assessment procedure and its transparency, as well as the reliability of the source data on which credit decisions are based. The research fills an existing gap in the economic literature for a comparative analysis of non-bank lending institutions in CEE countries from a supervisory and regulatory perspective and in terms of creating financial stability.


Keywords:

consumer finance, Central Europe, Eastern Europe, financial stability, household, indebtedness


Amby Legal (2024), What you need to know about consumer lending, [in:] https://ambylegal.by/ news/what-you-need-to-know-about-consumer-lending/ (accessed: 02.06.2024).   Google Scholar

BNB – Bulgarian National Bank (2024), Overview of the macroprudential measures introduced by the BNB to address the risks to the banking system, [in:] https://www.bnb.bg/bnbweb/groups/ public/documents/bnb_download/bs_mpp_overview_en.pdf (accessed: 22.06.2024).   Google Scholar

BOL – Bank of Lithuania (2024), Consumer credit providers, [in:] https://www.lb.lt/en/consumer-credit-providers-1 (accessed: 21.05.2024).   Google Scholar

BRSA – Banking Regulation and Supervision Agency (2013), Regulation on principles for establishment and operations of financial leasing, factoring and financing companies, Official Gazette 28627, [in:] https://www.cbfo.gov.tr/sites/default/files/docs/2021-06/regulationofestablisment_fkb_-en. pdf (accessed: 08.07.2024).   Google Scholar

Bublienė, D. (2014), The future of consumer credit in Lithuania: Quo vadis consumer credit? In: Juridica International 12, 149-167. DOI: 10.12697/JI.2014.22.12   Google Scholar

Cole, M. (2023), Audit Office: Consumer loan sector needs more effective supervision, ERR news, [in:] https://news.err.ee/1609030394/audit-office-consumer-loan-sector-needs-more-effective-supervision (accessed: 25.06.2024).   Google Scholar

Consumer Credit Act (2024), Ustawa z dnia 12 maja 2011 r. o kredycie konsumenckim, Dz.U. 2011 nr 126, poz. 715 z późn. zm.   Google Scholar

Csajbok, A. | Dadashova, P. | Shykin, P. et al. (2020), Consumer lending in Ukraine: estimation of the equilibrium level, [in:] Visnyk of the National Bank of Ukraine 249, 4-12, [in:] https:// journal.bank.gov.ua/uploads/articles/249-1.pdf (accessed: 15.07.2024).   Google Scholar

Dancausa, F. | Melecky, M. (2024), New beginnings: Resolving consumer insolvencies in Central Asia. World Bank, [in:] https://blogs.worldbank.org/en/psd/new-beginnings-resolving-consumer-insolvencies-central-asia (accessed: 10.07.2024).   Google Scholar

EC – European Commission (2020), Romania, [in:] https://commission.europa.eu/document/ download/64675a85-834d-4494-97f3-dbf37da089cc_en?filename=romania_country_fich_ en.pdf (accessed: 18.05.2024).   Google Scholar

ECB – European Central Bank (2020), Bulgaria – assessment of ERM II prior commitment No. 2 on the macroprudential toolkit, [in:] https://www.ecb.europa.eu/pub/pdf/other/ecb_assessment_ bulgaria_erm_II~42b06fb4e2.en.pdf (accessed: 22.06.2024)   Google Scholar

ECCR – European Consumer Centre Romania (2024), Consumer credit, [in:] https://eccromania. ro/language/en/topics/consumer-credit/ (accessed: 17.07.2024)   Google Scholar

EMN – European Microfinance Network (2016), EMN Legislative Mapping Report. Bulgaria, [in:] https://www.european-microfinance.org/sites/default/files/document/file/bulgaria.pdf (accessed: 09.07.2024).   Google Scholar

EMN – European Microfinance Network (2019a), EMN Legislative Mapping Report. Romania, [in:] https://www.european-microfinance.org/sites/default/files/document/file/romania2.pdf (accessed: 21.07.2024).   Google Scholar

EMN – European Microfinance Network (2019b), EMN Legislative Mapping Report. Bulgaria, [in:] https://www.european-microfinance.org/sites/default/files/document/file/bulgaria_0.pdf (accessed: 21.07.2024).   Google Scholar

EMN – European Microfinance Network (2023), Microcredit regulation in Europe: An overview, [in:] https://www.european-microfinance.org/sites/default/files/document/file/mainReport_NEW%20 %281%29.pdf (accessed: 29.05.2024).   Google Scholar

Erbilen, M. | Yamakoğlu, M. | Harmanşa, A. A. (2024), Digital banking versus traditional banking in Türkiye: the legal considerations for consumer protection, International Bar Association, [in:] https://www.ibanet.org/digital-banking-versus-traditional-banking-in-turkiye-legal-considerations-for-consumer-protection (accessed: 09.07.2024).   Google Scholar

ESRB – European Systemic Risk Board (2019), Template for notifying national macroprudential measures not covered by CRR/CRD, [in:] https://www.esrb.europa.eu/pub/pdf/other/esrb. notification190116_other_ro.en.pdf (accessed: 28.07.2024).   Google Scholar

ESRB – European Systemic Risk Board (2024), National measures of macropruden¬tial interest in the EU/EEA, [in:] https://www.google.pl/url?sa=t&rct=j&q=&es¬r c = s & s o u r c e = we b & c d = & c a d = r j a & u a c t = 8 & ve d = 2 a hU K Ew jJ sM K M 3b i H A x¬WoA 9sEH UqSA aUQFnoECC o QAQ& u rl=ht t p s%3A%2F%2Fw w w.e s r b.e u r op a . eu%2Fnational_policy%2Fshared%2Fpdf%2Fesrb.measures_overview_macroprudential_meas-ures.xlsx&usg=AOvVaw1nqEuI1H3KzXM2gp7qft_k&opi=89978449 (accessed: 19.06.2024).   Google Scholar

EU – European Union (2023), Directive (EU) 2023/2225 of the European Parliament and of the Coun¬cil of 18 October 2023 on credit agreements for consumers and repealing Directive 2008/48/EC   Google Scholar

EU – European Union (2008), Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC   Google Scholar

Fitch Ratings (2023), Turkish NBFIs’ Funding Profiles Remain Under Pressure Post-Election, [in:] https://www.fitchratings.com/research/non-bank-financial-institutions/turkish-nbfis-funding-profiles-remain-under-pressure-post-election-05-06-2023 (accessed: 10.07.2023).   Google Scholar

FLA – Finance & Leasing Association (2024), What is consumer finance? In: https://www.fla.org. uk/about-us/faqs/what-is-consumer-finance/ (accessed: 04.05.2024).   Google Scholar

FRRF (2022), Analysis of non-bank consumer credit markets in the European Union, [in:] https:// www.frrf.pl (accessed: 24.04.2024).   Google Scholar

Gattini, L. | Borysko, S. (2018), Republic of Belarus. Financial Sector Review and Private Sector Financing, EIB, [in:] https://www.eib.org/attachments/efs/republic_of_belarus_financial_sector_ review_en.pdf (accessed: 02.07.2024).   Google Scholar

Gębski, Ł. (2022), Regulacje konsumenckie i ochrona konsumenta na rynku usług finansowych, [in:] Waliszewski, K. (red.), Finanse osobiste. Warszawa, 303-314.   Google Scholar

Gusmanova, Z. | Kurmanalina, А. (2023), Development of consumer lending in the Republic of Kazakhstan: negative and positive aspects, [in:] ECONOMIC Series of the Bulletin of the L N Gumilyov ENU 1, 118-128, [in:] https://bulecon.enu.kz/index.php/main/article/view/131 (accessed: 02.08.2024)   Google Scholar

Hudima, T. | Ustymenko, V. | Dzhabrailov, R. et al. (2024), Consumer lending vs ludomania: From resilience to social responsibility in the case of Ukraine, [in:] Journal of Eastern European and Central Asian Research (JEECAR) 11 (2), 394-408.   Google Scholar

Iacob, E. (2016), New regulations for consumer credit in Romania, [in:] https://www.lexology.com/ library/detail.aspx?g=523d4439-43c2-45e8-8cf9-4494dbb69bde (accessed: 03.07.2024)   Google Scholar

ICLG (2024), Consumer Protection Laws and Regulations Romania 2024, [in:] https://iclg.com/ practice-areas/consumer-protection-laws-and-regulations/romania (accessed: 10.06.2024)   Google Scholar

IMF – International Monetary Fund (2020), Georgia. Technical assistance report––strengthen regulation, supervision, and oversight of micro lending institutions, [in:] https://www.imf.org/ en/Publications/CR/Issues/2020/09/03/Georgia-Technical-Assistance-Report-Strengthening- Regulation-Supervision-and-Oversight-of-49728 (accessed: 04.07.2024).   Google Scholar

IMF – International Monetary Fund (2022), Republic of Moldova. IMF Country Report No. 22/320, [in:] https://www.imf.md/press/SR_2022_1MDAEA2022006.pdf (accessed: 01.07.2024).   Google Scholar

IMF – International Monetary Fund (2024), Republic of Kazakhstan: Financial System Stability Assessment, [in:] https://www.elibrary.imf.org/view/journals/002/2024/048/article-A001-en.xml (accessed: 26.07.2024).   Google Scholar

IMF – International Monetary Fund. European Dept. (2023), Republic of Moldova: Second Reviews Under the Extended Credit Facility and Extended Fund Facility Arrangements, and Request for Waiver of Applicability for Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for Republic of Moldova. IMF Staff Country Reports, 2023(006), A001.   Google Scholar

InfoMarket (2022), From September 1, non-bank credit institutions must apply the requirements for responsible lending, 24 June 2022, [in:] https://infomarket.md/en/businesslaw/290099/ (accessed: 01.07.2024).   Google Scholar

ING (2023), Turkey: Another soft cap on personal need loans, [in:] https://think.ing.com/snaps/ turkey-another-soft-cap-on-personal-need-loans/ (accessed: 19.05.2024).   Google Scholar

Ivashchenko, A. | Horodetska, T. | Meleshkevich, S. (2021), Overview of the current state of consumer lending in commercial banks of Ukraine and its organizational and economic support, [in:] Economics. Finances. Law. 12, 22-28.   Google Scholar

Kandemir, A. | Ozsoy, T. (2023), Turkey is Pushing Lenders to Cut Rates on Consumer Loans, [in:] https://www.bloomberg.com/news/articles/2023-03-10/turkey-government-pushing-lenders-to-cut-rates-on-consumer-loans (accessed: 09.07.2024).   Google Scholar

KPMG (2019), NBR restricts debt-to-income ratio for loans from 1 January 2019, [in:] https://kpmg. com/ro/en/home/insights/2019/01/debt-to-income-ratio-loans-2019-restricted.html (accessed: 11.07.2024).   Google Scholar

Kumenov, A. (2023), Kazakhstan: Government tackles personal debt mountain, but not everyone is happy, [in:] https://eurasianet.org/kazakhstan-government-tackles-personal-debt-mountain-but-not-everyone-is-happy (accessed: 10.07.2024)   Google Scholar

Labanava, Y. (2018), Consumer loans of Belarusians could cause economic catastrophe, [in:] https:// belsat.eu/en/news/consumer-loans-of-belarusians-could-cause-economic-catastrophe (accessed: 02.07.2024)   Google Scholar

Lehmann, A. (2019), Regulation of the micro-finance sector in Moldova, [in:] https://www.german-economic-team.com/wp-content/uploads/2022/03/PB_01_2019_en.pdf (accessed: 16.05.2024)   Google Scholar

Mazure, G. (2017), Non-bank consumer crediting trends in Latvia, [in:] Research for rural development. 2, 276-283.   Google Scholar

MG LAW (2023), Introducing Microbanks – New Financial Institution in Georgia, [in:] https:// mglaw.ge/2023/06/09/introducing-microbanks-new-financial-institution-in-georgia/ (accessed: 14.07.2024)   Google Scholar

Molodyko, K. (2018), Regulatory choices of Russian and Ukrainian legislators in consumer credits: a comparative perspective, [in:] Russian Law Journal. 6, 100-125.   Google Scholar

Monahov, A. (2022), The DSTI Gap: Measuring the Impact of An Inflationary Shock on Borrowers’ Repayment Capacity in 14 European Economies, [in:] https://ssrn.com/abstract=4089856 or http:// dx.doi.org/10.2139/ssrn.4089856 (accessed: 28.09.2024).   Google Scholar

NBG – National Bank of Georgia (2016), National strategy for financial education in Georgia. Financial literacy for financial well-being, [in:] national-strategy-for-financial-education-of-georgia-2023.pdf (nbg.gov.ge) (accessed: 03.08.2024).   Google Scholar

NBG – National Bank of Georgia (2018), Order # 143/04 of 5 July 2018 of the President of the National Bank of Georgia on Approval of Regulation on Supervision and Regulation of Microfinance Organization Activities   Google Scholar

NBG – National Bank of Georgia (2021), Order of the President of the National Bank of Georgia No. 32/04 of 9 March 2021 on the approval of principles for the protection of consumer rights in the provision of services by financial organisations.   Google Scholar

NBG – National Bank of Georgia (2023), Financial Stability Report 2023, [in:] https://nbg.gov.ge/ en/publications/financial-stability-reports (accessed: 04.06.2024).   Google Scholar

NBM – National Bank of Moldova (2023), Financial stability report for 2022, [in:] https://www. bnm.md/files/RSF_2022_EN_v1.pdf (accessed: 01.07.2024).   Google Scholar

NBP – National Bank of Poland (2024), Financial stability report. June 2024, [in:] https://nbp.pl/ wp-content/uploads/2024/06/Raport-o-stabilnosci-systemu-finansowego.-Czerwiec-2024-EN. pdf (accessed: 28.09.2024).   Google Scholar

NBR – National Bank of Romania (2023), Financial Stability Report, December 2023, [in:] https:// www.bnr.ro/PublicationDocuments.aspx?icid=19968 (accessed: 18.07.2024)   Google Scholar

NBU – National Bank of Ukraine (2024a), Financial Stability Report. June 2024, [in:] https://bank. gov.ua/admin_uploads/article/FSR_2024-H1_eng.pdf?v=7 (accessed: 16.07.2024).   Google Scholar

NBU – National Bank of Ukraine (2024b), Macroprudential Policy Strategy of the National Bank of Ukraine, [in:] https://bank.gov.ua/en/stability/macro#71-strategic-documents (accessed: 27.07.2024).   Google Scholar

Niedziółka, P. (2009), Kredytowe instrumenty pochodne a stabilność finansowa. Warszawa.   Google Scholar

Nurbayev, D. (2016), Consumer lending in Kazakhstan. Eurasian Research Institute, [in:] Weekly e-bulletin 79, [in:] https://eurasian-research.org/wp-content/uploads/2020/08/Weekly-e-bulletin- 30.08.2016-05.09.2016-No-79.pdf (accessed: 19.07.2024).   Google Scholar

Prime Minister of the Republic of Kazakhstan (2023), Kazakhstan works out legislative amendments to strengthen protection of creditors rights, [in:] https://primeminister.kz/en/news/kazakhstan-works-out-legislative-amendments-to-strengthen-protection-of-creditors-rights-26105 (accessed: 10.07.2024).   Google Scholar

Riigikogu (2016), Creditors and Credit Intermediaries Act, [in:] https://www.riigiteataja.ee/en/ eli/523122021001/consolide (accessed: 24.07.2024).   Google Scholar

Santoso, W. | Sukada, M. (2009), Risk profile of households and the impact on financial stability, [in:] BIS Papers chapters, Bank for International Settlements (ed.), Household debt: implications for monetary policy and financial stability 46, 58-74.   Google Scholar

Schendra, C. (2023), NBM takes over supervision of non-bank lending. Deputy Governor: lending portfolios should become more qualitative. IPN interview, [in:] https://www.bnm.md/en/content/ interview-nbm-takes-over-supervision-non-bank-lending-deputy-governor-lending-portfolios (accessed: 01.07.2024).   Google Scholar

Şenocak, A. (2022), Consumer Law. Turkey, Gide, [in:] https://www.gide.com/sites/default/ files/gide_odsa_clientalert_protection_of_consumers_-_eng_-_may2022_final.pdf (accessed: 09.07.2024).   Google Scholar

Sozer, C. (2021), Turkey Increases Fines for Consumer Law Violations in 2022, [in:] https://www. esin.av.tr/2021/12/17/turkey-increases-fines-for-consumer-law-violations-in-2022/ (accessed: 09.07.2024).   Google Scholar

Stănescu, C. G. (2023), The Enforcement of Consumer Financial Protection in Romania, [in:] Journal of European Consumer and Market Law 12 (3), 102-112, [in:] https://kluwerlawonline. com/journalarticle/Journal+of+European+Consumer+and+Market+Law/12.3/EuCML2023024 (accessed: 17.07.2024)   Google Scholar

Stratulat Albulescu (2024), Government Emergency Ordinance no. 15/2024 on credit services and credit purchasers, [in:] https://saa.ro/en/legal-updates/government-emergency-ordinance-no-15- 2024-on-credit-services-and-credit-purchasers/ (accessed: 12.06.2024)   Google Scholar

UBN – Ukrainian Business News (2024), Experts confirm the recovery of consumer lending in Ukraine, [in:] https://ubn.news/experts-confirm-the-recovery-of-consumer-lending-in-ukraine/ (accessed: 16.07.2024).   Google Scholar

UMW – Warsaw City Office (2024), Kredyt, pożyczka i kredyt konsumencki – czy się różnią?, [in:] https://um.warszawa.pl/waw/konsument/-/kredyt-pozyczka-i-kredyt-konsumencki-czy-sie-roznia- (accessed: 04.07.2024).   Google Scholar

USAID (2018), A rapid review of Moldova’s financial sector. Conditions, constraints, and opportunities, [in:] https://pdf.usaid.gov/pdf_docs/PA00TGXW.pdf (accessed: 03.06.2024).   Google Scholar

Vasileva, V. N. (2019), Development of consumer lending by non- bank credit companies in Bulgaria, [in:] Economic Archive 1, 65-76. https://dlib.uni-svishtov.bg/bitstream/ handle/10610/4064/5a2d6d047832fc942d5b4ef201f b039a.pdf?sequence=1&isAllowed=y (accessed: 21.07.2024)   Google Scholar

Waliszewski, K. (2022), Wstęp, [in:] Waliszewski, K. (red.), Finanse osobiste. Warszawa, 11-12.   Google Scholar

Waliszewski, K. | Gębski, Ł. (2024), FinTech lenders on the consumer finance market in Central and Eastern Europe, [in:] Przegląd Wschodnioeuropejski 15 (1), 81-96.   Google Scholar

Waliszewski, K. | Cichowicz, E. | Gębski, Ł. et al. (2023), The role of the Lendtech sector in the consumer credit market in the context of household financial exclusion, [in:] Oeconomia Copernicana 14 (2), 609-643.   Google Scholar

Waliszewski, K. | Cichowicz, E. | Gębski, Ł. et al. (2024), Digital loans and buy now pay later from LendTech versus bank loans in the era of ‘black swans’: Complementarity in the area of consumer financing, [in:] Equilibrium. Quarterly Journal of Economics and Economic Policy 19 (1), 241-278.   Google Scholar

World Bank (2024), Kazakhstan Financial Sector Assessment Program (FSAP) Technical Note – Consumer Protection and Consumer Lending (English). Washington, D.C.: World Bank Group, [in:] http://documents.worldbank.org/curated/en/099041124104519180/P1803101da3cce¬0841aed0102126e8e0490 (accessed: 18.06.2024).   Google Scholar

Yuksel, S. | Ozsari, M. (2016, December), Impact of Consumer Loans on Inflation and Current Account Deficit: A Toda Yamamoto Causality Test for Turkey, [in:] World Journal of Applied Economics, WERI-World Economic Research Institute 2 (2), 3-14.   Google Scholar


Published
2025-07-01

Cited by

Waliszewski, K., & Niedziółka, P. (2025). Do regulatory stringency and household indebtedness affect financial stability? An analysis of the market for non-bank lending institutions in selected Central and Eastern European countries. Przegląd Wschodnioeuropejski, 16(1), 59–81. https://doi.org/10.31648/pw.11450

Krzysztof Waliszewski 
Poznań University of Economics and Business
Paweł Niedziółka 
SGH Warsaw School of Economics