MNB Introduces Capital Relief for Green Lending, Confirms List of SIIs
MNB announced that the list of systemically important credit institutions (also known as SIIs) domiciled in Hungary has remained unchanged, based on the annual assessment. MNB also maintained its previous decision to temporarily release the buffers from July 01, 2020 in view of the extraordinary circumstances caused by the COVID-19 pandemic. The capital buffer rate of the systemically important institutions will remain 0% in 2021. Institutions will be required to rebuild the buffers gradually in three years starting from 2022. In addition, MNB has introduced the preferential capital requirements for green corporate and municipal financing; it also plans to consult about details of the related reporting requirements with banks in the coming weeks.
Introduction of Preferential Capital Requirements for Green Corporate and Municipal Financing
Due to the transition risks related to climate change and other environmental anomalies, MNB considers it desirable that the share of environmentally sustainable (green) industries and customers on bank balance sheets should increase compared to the “brown” exposure. To this end, starting with the Internal Capital Adequacy Assessment Process (ICAAP) reviews of 2021, MNB intends to improve the risk profile of the banking sector and encourage green lending through a positive incentive, by releasing a part or all of the capital requirements prescribed in Pillar 2 of capital regulation for environmentally sustainable corporate and municipal exposures that meet the criteria set out in the detailed terms and conditions. MNB will provide this preferential capital requirements for five years. The preferential capital program will initially cover the financing of renewable energy production (as defined by the EU Taxonomy) and the purchase of (investment in) green bonds, but this list of eligible exposures will gradually expand in 2021.
Announcement on Systemically Important Institutions
MNB has reassessed and reaffirmed the systemic importance of the eight institutions identified last year based on the 2019 year-end data. These institutions are OTP Bank Nyrt., UniCredit Bank Hungary Zrt., Kereskedelmi és Hitelbank Zrt., ERSTE BANK HUNGARY Zrt., Raiffeisen Bank Zrt., MTB Magyar Takarékszövetkezeti Bank Zrt. CIB Bank Zrt., and MKB Bank Nyrt. MNB also published a table that sets out the assessment score for these institutions and the planned transitional path for rebuilding the buffers during 2022-2024.
Keywords: Europe, Hungary, Banking, COVID-19, Regulatory Capital, ESG, ICAAP, Pillar 2, Systemic Risk, O-SII, Capital Buffers, Sustainable Finance, Climate Change Risk, Reporting, Basel, Transition Risk, MNB
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