capitalization-to-GDP ratio is around 40 percent (see figure 4), while assets of the banking sector reached 81 percent of GDP in 2008, and 82 percent in 2010.

There is no universally accepted definition of _credit boom_ or _excessive credit growth_ in Poland. The stock of loans is still relatively low, especially in comparison with other EU countries. The ratio of credit of the nonfinancial sector to GDP is below 50 percent (see figure 6). Nevertheless the NBP and the Polish Financial Supervision Authority (KNF) prepared some estimates concerning this subject. The first one is based on prices of the residential properties.

An increase in prices of residential property has been observed in Poland since 2003 but so far has not exceeded 10–20 percent annually. In 2006, the growth rate of prices for flats significantly accelerated (see figure 5). The increases were recorded in both the primary and secondary market. The main reason for the acceleration of prices for residential property in 2006 was the growing imbalance between demand and supply on the housing market coupled with strongly increasing price expectations.

Apart from the structural factors, the demand increase resulted from the impact of factors related to the phase of the business cycle and short-term factors. The major reasons for the increased demand for flats include (i) the improvement in the financial situation of many households, (ii) better availability of financing for housing investments with bank loans, and (iii) increased investment and speculative demand. Since the beginning of 2008, prices of residential property have been stabilizing or decreasing. The slowdown of the growth rate of prices in the primary market may have been influenced by a further increase in supply in the main urban areas. The decline in prices of flats in 2009–2010 was mainly caused by a decrease in households' effective demand. The following factors contributed to the decline in demand: (i) tightening of banks’ lending policy, (ii) a slower growth rate of households' disposable income and (iii) a rise of unemployment. On the other hand, the activity rate also increased, which means that previously economically inactive persons became active job seekers (see figure 25). According to information on residential prices, the period 2006–2007 can be considered a housing credit boom.

An alternative estimation of the credit boom period could be based on the Basel Committee’s 2010 proposal. The committee proposed using the difference between the current private credit ratio as a percentage of GDP and its trend value estimated by means of the Hodrick-Prescott (HP) filter (the ―credit-to-GDP gap‖). When gaps rise above 2 percentage points, creation of the capital buffer should start. The historical data of the credit-to-GDP ratio and Hodrick-Prescott trends are presented on figure 7. The housing-loan-to-GDP ratio was also analyzed (see figure 8). The gaps are presented in figure 9 and figure 10. The results suggest that the credit boom in Poland started in 2008 Q3 and probably ended at the beginning of 2010.

We must remember that the HP filter generates a highly unreliable estimate of the trend at the end of the data period. For this reason alternative methods could be used. Reports of the NBP (2011) and Czech National Bank (CNB 2011) presented results of other estimations. The final conclusions suggested that the HP filter-based calculation of credit booms is not necessarily appropriate in the case of Poland. For the CEE countries in particular, rapid credit growth may simply mean convergence with values typical of the advanced economies, and not necessarily excessive borrowing. However, the dynamics of housing loans during 2006–2008 can be considered an indicator of an early phase of the credit boom.

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