Miroslav Singer (The Economist 5.3.2009)
SIR – One of your recent leaders on east and central European economies included the Czech Republic among those countries whose “tumbling” currencies have increased the “agony for households that have mortgages in Swiss francs or euros” (“Argentina on the Danube?”, February 21st). Actually, there are almost no households in the Czech Republic that have mortgages or any other loans denominated in foreign currency.
The foreign-currency borrowing of Czech households is a negligible 0.1% of total household loans, which anyway are very low by any standard, totalling 25% of GDP or 30% of the financial assets of households. The behaviour of Czech households is a direct consequence of the fact that Czech koruna interest rates have been mostly below euro ones in recent years, and koruna-denominated mortgage loans have been the least expensive in the European Union.
Furthermore, although Czech banks are mostly owned by European groups, they have never needed credit from abroad since they financed their loans from the domestic deposits of Czech savers. The loan-to-deposit ratio of the Czech banking sector is currently 77%, among the lowest in the EU, and Czech banks are mostly net creditors of the European groups they belong to.