MNB Welcomes Recommendations to Make Capital Markets Sustainable

MNB ordered the winding up of Sberbank Hungary due to the serious liquidity and capital problems the bank was facing. The National Deposit Insurance Fund will reimburse all eligible customers their deposit claims up to EUR 100,000 within ten working days. The Single Resolution Board had also launched, on March 01, 2022, winding up proceedings of the parent of Sberbank Hungary, the Austrian Sberbank Europe AG. Additionally, MNB recently welcomed a set of recommendations, which were developed with financial support from the European Commission, as part of an advisory project to make capital markets more sustainable. The recommendations relate to non-financial reporting, development of the legal and regulatory framework of sustainable capital markets, landscape of sustainable investments and ecosystems, public funds to foster sustainable investments, and enablers and barriers of sustainable investments in capital markets. The key recommendations include the following:

• Early implementation of Corporate Sustainability Reporting Directive (CSRD) by updating the existing environmental, social, and governance (ESG) Report guide of the Budapest Stock Exchange with the preliminary rules of CSRD to allow reporting in Hungary to pick up speed. T
• Better transparency and disclosure of ESG data to the market so that the market participants are in compliance with European and national regulations on climate risk assessment, reporting or allocation of eligible green assets.
• Raising of awareness among medium and large market players on reporting requirements, methodologies, and data needs.
• Extension of the Green Preferential Capital Requirement regime to sustainability-linked bonds.
• Consistency of ESG profiles of issuers with the sustainable investment offerings (because the risk of greenwashing might lead to divestment).
• Definition of green default by determining a more appropriate term for the concept and assessing the potential for introducing financial penalties for such defaults to strengthen the credibility of the sustainable investments.
• Encouraging the application of voluntary reporting standards until CSRD standards are not adopted by the European Union and Hungary, to generate potential sources of information for Regulation on sustainability‐related disclosures in the financial services sector (SFDR disclosures).
• Considering the introduction of minimal reporting requirements for companies not obliged by CSRD on certain relatively easily available ESG data such as GHG emissions (scope 1 and 2) to spread sustainable finance products.

Keywords: Europe, Hungary, Banking, Sustainable Finance, Sberbank, CSRD, NFRD, SFDR, ESG, Climate Change Risk, Resolution Framework, Disclosures, Reporting, Basel, MNB