Martin Hodula, Lukáš Pfeifer
The Czech Republic provides a unique setting to examine the effects of loan moratoria during the COVID-19 pandemic, as it combined broad-access legislative moratoria with stricter, eligibility-based bank moratoria. Using detailed loan-level data from the Czech mortgage market, we find that legislative moratoria were predominantly precautionary, addressing a wide range of borrowers, whereas bank moratoria were primarily utilized by higher-risk borrowers facing solvency challenges. Post-moratoria, we observe limited materialization of credit risk, which was nearly twice as high for bank moratoria compared to legislative moratoria. Stricter borrower-based regulations (LTV, DTI, and DSTI limits) implemented prior to the pandemic were associated with lower moratoria uptake and reduced post-moratoria arrears. These findings underscore the effectiveness of combining universal legislative moratoria with targeted bank measures to balance immediate economic relief and long-term financial stability.
JEL codes: E44, G21, G28, G51
Keywords: Borrower-based measures, COVID-19 economic policy, credit risk mitigation, loan moratoria, mortgage arrears
Issued: January 2025
Download: CNB WP No. 1/2025 (pdf, 1.3 MB)