Another striking – and potentially worrying – feature of credit growth in some of the new Member States is the high share of foreign currency-denominated loans. These loans are mostly euro-denominated, although loans in other currencies have also been gaining in importance recently. They have typically been granted to non-financial corporations, though also to households in the Baltic countries and Poland.
Borrowing in foreign currency has been driven by lower borrowing costs and stimulated by the financial liberalisation in some countries prior to EU entry. The majority of foreign currency loans are held by larger multinational firms, which generate the greater part of their revenues in foreign currency, and can therefore also be considered as a hedging instrument.