In the light of rapidly rising household debt, we undertake panel estimation of
determinants of debt-income ratios in new EU member states of Central and Eastern Europe
and interpret the results in the light of indicators of housing bubbles, estimates of equilibrium debt ratios from Western Europe and information on foreign currency borrowing in the CEE. We conclude that there are potential risks from overindebtedness in some of these countries, while in others where debt-income ratios appear sustainable, there remain risks related to high levels of foreign currency debt, notably where there is a floating exchange rate. Important
issues are raised for future economic performance as well as the structure of banking regulation
