There are good reasons to believe that correctly determining the current phase of the credit cycle is essential for efficient policymaking. Borio and Lowe (2002, 2004) document the property of the credit gap (the gap between the credit-to-GDP ratio and its long-term trend) as a very useful early warning indicator for banking crises. The association of general macroeconomic and financial developments with credit boom/bust cycles is also examined closely in a number of studies (see e.g. Mendoza and Terrones (2012)). Importantly, the close link between credit cycle indicators and credit losses is well documented (Dell’Ariccia et al. (2012); Geršl and Seidler (2015); Jokivuolle et al. (2015)).