System risk lessons from FX loans in Central and Eastern Europe

Piotr Jacek Szpunar

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The phenomenon of loans made in Central and Eastern European countries (CEE) denominated in or indexed to foreign currencies (foreign exchange loans) raises questions related to macro-prudential policy for at least three reasons. Firstly, it is a clear example of a situation where the sum of individually rational actions creates a collectively damaging risk – a market failure creating a systemic risk. Second, the history of regulatory actions and their rather

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