The Hungarian National Bank (Nemzeti Bank or MNB) announced its decision to maintain the countercyclical capital buffer (CCyB) rate at 0% from July 01, 2021. MNB also revised its regulation on the Mortgage Funding Adequacy Ratio (MFAR). According to the amendment, from July 01, 2021, green mortgage-backed funds can be taken into account in the calculation of the ratio with a preferential weighting. Based on the decision of the Financial Stability Board of MNB, green mortgage-backed funds with an original maturity of more than 5 years may be taken into account with a higher weight of 1.5 when calculating the MFAR.
For the labeling of mortgage bonds as green, MNB requires banks to follow standards that are widely accepted and employed internationally to support bank adjustment and investor orientation. In addition to the preferential treatment of green mortgage-backed funds, the Financial Stability Board also made changes in the regulation supporting the reduction of the sector-level HUF maturity mismatch: raising the required minimum level of the ratio from 25% to 30%, expecting newly issued mortgage bonds to be listed on a stock exchange, and reintroducing the restrictions on cross-ownership of mortgage bonds by banks (which were suspended due to pandemic). These changes will take effect on October 01, 2022, to ensure adequate preparation time for banks and are not expected to cause significant adjustment difficulties for them, given the preferential weighting of green liabilities.
In a separate statement, MNB suggests borrowers to resume repayment of their loans as soon as possible. Interest will accrue on the outstanding loan even in the period during the repayment moratorium. This can be repaid in equal annual installments (not capitalized) by extending the term, and the monthly repayment is the same as calculated when ordering the payment stop. Extending the term and evenly repaying also means that individual customers continue to use the bank’s money, which means that they have to pay more money to their credit institution overall. However, those who do not want to repay more interest and their financial situation allows, it is worth starting to repay their loan again as soon as possible.
Effective Date: July 01, 2021/October 01, 2022
Keywords: Europe, Hungary, Banking, ESG, COVID-19, Loan Moratorium, Loan Repayment, Credit Risk, CCyB, Regulatory Capital, Mortgage Funding Adequacy Ratio, Sustainable Finance, MFAR, MNB
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