The Hungarian National Bank (MNB) published a notice that sets out the technical conditions for the Green Mortgage Bond Purchase Program and the Mortgage Bond Rollover Facility. MNB also decided to finetune the collateral management framework by improving the conditions of green securities. To promote green mortgage bond issuance and support the construction and purchase of new and modern residential real estate, MNB will purchase fixed-rate mortgage bonds with a green rating, in accordance with the international standards, denominated in HUF and issued with an original maturity of at least 5 years, from the primary and secondary markets from August 02, 2021 onward. To increase transparency in the green securities market, MNB expects issuers and banks participating in the program to publish regular sustainability reports.
MNB also expects issuers and banks participating in the program to develop customer information practices on green aspects, in addition to the market making obligations applied in the previous mortgage bond purchase program. To support the stability of the mortgage bond market, the Mortgage Bond Rollover Facility will become available again. In July 2021, the Monetary Council reviewed and approved the Green Monetary Policy Toolkit Strategy of MNB and decided to launch the Green Mortgage Bond Purchase Program. The new program is a targeted and effective tool to contribute to the development of a domestic green mortgage bond market and to promote green mortgage lending. MNB has published this notice on the Green Mortgage Bond Purchase Program, in line with the decision of Monetary Council.
Additionally, in line with the green monetary policy toolkit strategy of MNB, the MNB Board has decided to amend the collateral management system. The most important change to the collateral management system is that MNB will apply preferential haircut for green securities from September 01, 2021. The change in collateral management practices can strengthen financial stability and provide a further demand-side stimulus to the green asset market. Also, due to the recent substantial boost in central bank liquidity, MNB will cease to accept shares/units of investment funds as collateral from September 01, 2021. This adjustment will not affect collateral management of banks, as the role of shares/units of investment funds in collateral management practices has remained negligible in recent months. Finally, MNB announced that nine banks have joined its "Green Capital Requirement Discount Program," issuing nearly HUF 100 billion in favorable corporate green loans in a few months. At the beginning of July this year, MNB announced, for the first time, a green housing loan program supporting sustainability, which in the has the potential to provide tens of thousands of families with low-interest home-building loans for the construction and purchase of their homes.
Keywords: Europe, Hungary, Banking, Securities, Climate Change Risk, Green Bonds, ESG, Residential Real Estate, Credit Risk, Regulatory Capital, Sustainable Finance, MNB
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
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