The limit on the DSTI ratio, an indicator of debt repayment ability, creates income buffers. This limit reduces the risk of loan default, especially during times of crisis. It protects both borrowers and lenders.

A loan may not be granted if the household’s resulting loan repayments, including repayments on any other loans, would exceed 60% of its income. The repayment total is calculated using a stressed interest rate. The household’s income is its income less the minimum subsistence amount.

Main exemptions:

• For up to 5% of new loans, the DSTI ratio may be between 60% and 70%
• For up to a further 5% of consumer credit with a maturity of up to five years, the DSTI ratio may be between 60% and 70%

The limit on the DTI ratio, an indicator of total indebtedness, mitigates the risks from rapid growth in household indebtedness. Over-indebted households may have serious repayment difficulties, and their problems may eventually spill over into the whole financial sector and economy.

For borrowers aged up to 40 years (including), the debt-to-income ratio limit is set at eight times the borrower’s annual household income. For older borrowers who will still be repaying their loans after reaching 65, the limit is incrementally reduced.

Main exemptions:

• For up to 5% of new loans, the DSTI limit of eight may be exceeded
• For up to a further 5% of loans that are mortgages for young people, the DSTI limit is set at nine

It is important that loans are secured, especially in case of default. If the value of the property against which the loan is secured is not enough to pay off the debt, the borrower is exposed to foreclosure. The bank then also incurs increased losses.

At the same time, the limit on the loan-to-value ratio – i.e. the ratio of a loan to the value of the property against which it is secured – supports sound developments in the real estate market. Decisions to buy a home tend to be more responsible if they are at least partly financed out of savings.

The loan amount may not exceed 80% of the value of the property against which it is secured.

Main exemption:

• For up to 20% of new loans, the LTV ratio may be up to 90%

The maturity of a loan should be commensurate with its purpose and the collateral. It helps the borrower avoid excessive debt. It also reduces the risk of rising household indebtedness.

The maturity of an unsecured loan may not exceed eight years. Most such lending is the form of consumer credit. The maturity of a secured loan may not exceed 30 years. Only housing loans fall into this category.

Main exemptions:

• For up to 10% of new housing loans, the maturity may exceed 30 years
• Certain unsecured loans provided by home savings banks may have a maturity of up to 30 years

Housing loans are to be repaid in equal monthly instalments or faster.

Banks use good times to prepare for bad times, i.e. they build up capital buffers. Banks hold capital (funds) as a buffer against risks associated with their business.

Capital buffers must be made up of the highest-quality capital – Common Equity Tier 1 (CET 1).

The buffer rates are periodically reviewed and currently stand as follows:

Banks operating abroad must also follow the macroprudential instruments applied in the given country. Some instruments apply automatically, while others must first be recognised by Národná banka Slovenska.