MNB announced transitional measures for the supervisory capital requirements for credit institutions, indicating that it will temporarily tolerate a possible breach of the capital buffer requirement. However, MNB expects market participants to meet this capital buffer requirement by at least 50% by June 30, 2022 and to comply fully with the requirement by January 01, 2023. MNB also recommended that credit institutions should maintain restrictions on dividend payments, share repurchases, and variable remuneration payment until September 30, 2021. As another announcement, MNB conveyed the decision to maintain the countercyclical capital buffer (CCyB) rate at 0% from January 01, 2021.
Finally, as an amendment to the management circular on credit risk factors under IFRS 9, MNB published the detailed guidelines on the application of default and restructuring categories with respect to the repayment moratorium. EBA had recently decided to extend the application of its guidelines on payment moratoria until March 31, 2021. This states, inter alia, that bank exposures with a moratorium of more than nine months must be classified as restructured by credit institutions if the payment was rescheduled or rescheduled after September 30, 2020. According to the MNB circular, despite the restructured rating, it is not necessary to reclassify corporate exposures for which there is no financial difficulty according to the monitoring data. In the case of the retail portfolio, the central bank develops a system of conditions through which it is possible to objectively filter out clear cases in which it is also not necessary to classify in the category resulting in higher impairment. Retail exposures that are subject to higher impairment but are properly repaid within six months of their removal from the moratorium may be reclassified to the safer category and the accumulated impairment may be released.
Keywords: Europe, Hungary, Banking, Regulatory Capital, COVID-19, CCyB, Dividend Distribution, Basel, Loan Moratorium, Reporting, Macro-Prudential Policy, IFRS 9, Credit Risk, MNB
Scott is a Director in the Regulatory and Accounting Solutions team responsible for providing accounting expertise across solutions, products, and services offered by Moody’s Analytics in the US. He has over 15 years of experience leading auditing, consulting and accounting policy initiatives for financial institutions.
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