MNB Report Discusses Macro-Prudential Policy Amid Crisis
MNB published a report that examines the macro-prudential measures of the past more than one and a half years. The report also explores the impact of previous regulations on the current risks posed by the pandemic as well as the steps taken in response to the pandemic. In the future, MNB will focus on changes in the EU financial regulatory framework, the potential consequences of climate change and green transition for financial stability, and the effects of expanding the range of certified consumer-friendly products.
Owing to the macro-prudential framework built in recent years, the domestic banking system has faced the coronavirus epidemic in a stable state and is still able to play its role of financing the economy. The healthy structure of the retail loan portfolio, supported by "debt brake rules" as well as the release of capital buffers in the Spring helped maintain banks' lending capacity. The capital buffer rates previously prescribed for 2020 will have to be gradually rebuilt by the concerned banks between 2022 and 2024. Furthermore, in 2020, the central bank will not review the systemic risk capital buffer rates, to avoid the negative lending effects of the buffer, which may be created due to the possible increase in the non-performing project loan portfolio in connection with the epidemic situation.
Due to the 2019 amendment of the "Single European Code" defining the prudential requirements for financial institutions, the framework of macro-prudential regulation will also change from 2021. The changes mainly concern the application of capital buffer requirements: a novelty in connection with the systemic risk capital buffer is the expansion of the range of risks that can be covered and the possibility of prescribing on a sectoral basis. In the future, MNB will examine the need to adapt its regulations to these changes. MNB has begun to explore the exposure of the domestic financial system to potential systemic risks due to climate change. Looking to the future, MNB is examining the possibilities of achieving green goals through prudential incentives, primarily in connection with the mortgage bond market. The central bank is also examining the possibility of developing incentives for the banking system to move toward green financing in macro-prudential regulation.
Related Links
Keywords: Europe, Hungary, Banking, Macro-Prudential Policy, CCyB, Systemic Risk Buffer, Climate Change Risk, ESG, COVID-19, MNB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Victor Calanog, Ph.D.
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Blake Coules
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
Previous Article
ISDA Organizes ESG-Related Working Group, Calls for StandardizationRelated Articles
EU Agencies Update LCR Rule and Macro-Prudential Policy Recommendation
The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).
EBA Publishes Regulatory Standards to Identify Shadow Banking Entities
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.
OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities
The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.
EBA Proposes Standards to Support Secondary NPL Markets
The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.
EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution
The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).
EBA Issues Standards for Crowdfunding Service Providers Under ECSPR
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.
EU to Amend Credit Risk Adjustment Rules; ESAs Submit Queries on SFDR
The European Council published a draft Commission Delegated Regulation to amend the regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution
The European Securities and Markets Authority (ESMA) published a paper that examines the systemic risk posed by increasing use of cloud services, along with the potential policy options to mitigate this risk.
MAS Amends Notice 635 and Issues Second Proposal on Green Taxonomy
The Monetary Authority of Singapore (MAS) published amendments to Notice 635, which sets out requirements that a bank in Singapore has to comply with when granting an unsecured non-card credit facility to individuals.
EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA
The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.
