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
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Related Articles
EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
EP Reaches Agreement on Corporate Sustainability Reporting Directive
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
PRA Consults on Model Risk Management Principles for Banks
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
EC Regulation Amends Standards for Calculating Credit Risk Adjustments
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
BIS Hub Updates Work Program for 2022, Announces New Projects
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
EIOPA Consults on Review of Securitization Framework in Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
UK Authorities Issue Regulatory and Reporting Updates for Banks
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
BCBS Issues Climate Risk Principles while HKMA Expresses Its Support
The Basel Committee on Banking Supervision (BCBS) issued principles for the effective management and supervision of climate-related financial risks.
