Featured Product

    MNB Details Progress on Sustainability Initiatives in Financial Sector

    March 03, 2021

    MNB published the first report on the environmental sustainability of the financial system in Hungary. The report highlights that Hungary is lagging behind in a number of areas in achieving the Sustainable Development Goals, or SDGs, and the country ranks 19th in Europe overall in terms of these goals. Additionally, an MNB survey suggests that the green aspects have clearly strengthened in case of banks last year, though the Hungarian banking sector is still at a serious disadvantage compared to euro area institutions.

    The report reveals that the financial system in the country has only marginally integrated environmental sustainability aspects into its operation and, consequently, only little “green financial” data is available for now. Only a few percent of the Hungarian financial capital can be estimated as green, while achieving the international and national objectives requires much more environmentally sustainable private investments. Additionally, Hungarian banks are generally unaware of the extent of their climate risk exposures and are, therefore, unable to properly manage or mitigate them. For the first time, the “Bank Carbon-Risk Index” (developed by MNB) provides an insight into the Hungarian banking sector's exposure to transition risks and shows a negative trend and a strong risk concentration. The share of environmentally sustainable economic activities financed by the banking sector cannot be quantified at present, but based on MNB estimates, excluding the energy sector, it is presumably very modest.

    Nonetheless, in the capital markets, the report notes that the 2020 launch of the green bond market in Hungary is an important milestone, which may be accompanied by the market penetration of ESG-based investment products. Despite the coronavirus epidemic, two green government securities and three green corporate bond issues were successfully carried out in 2020. The expansion of domestically issued green assets may also help the development of investment products using the ESG approach, the share of which is, however, negligible for the time being. In addition to the measures of MNB to promote green finance, EU and global initiatives can also quickly transform the Hungarian and European financial markets. The introduction of new EU rules applicable to large companies, banks, and institutional investors only started in 2018, but its provision on sustainable investments will be applicable in the Hungarian market already from March 2021, followed by a new set of banking regulations from 2022. The report concludes that meeting the existing data gaps is necessary, as such gaps can result in, among other things, incorrect pricing of climate risks, which undermine prudent risk management. Overcoming this problem is a clear priority of EU legislation, with the MNB also attempting to improve it through several existing and planned measures.

     

    Keywords: Europe, Hungary, Banking, Insurance, Securities, ESG, Climate Change Risk, Sustainable Finance, Sustainable Development Goals, Green Bonds, MNB

    Related Articles
    News

    APRA Issues Interim Update to Policy Priorities for 2021 and Beyond

    In a letter addressed to the industry, the Australian Prudential Regulation Authority (APRA) set out an updated schedule of policy priorities for the banking, insurance, and superannuation industries.

    September 24, 2021 WebPage Regulatory News
    News

    EC Adopts Solvency II and Resolution Rules Package for Insurers

    The European Commission (EC) adopted a comprehensive review package of Solvency II rules in the European Union.

    September 22, 2021 WebPage Regulatory News
    News

    OCC Issues Booklets on Regulatory Reporting and Earnings

    The Office of the Comptroller of the Currency (OCC) issued Versions 1.0 of the "Earnings" and "Regulatory Reporting" booklets of the Comptroller's Handbook.

    September 22, 2021 WebPage Regulatory News
    News

    ECB Sets Out Results of Economy-Wide Climate Stress Tests

    The European Central Bank (ECB) published results of its economy-wide climate stress test, which aimed to assess the resilience of non-financial corporates and euro area banks to climate risks.

    September 22, 2021 WebPage Regulatory News
    News

    EBA Examines Implications of Increasing Use of Digital Platforms in EU

    The European Banking Authority (EBA) published a report on the use of digital platforms in the banking and payments sector in European Union.

    September 21, 2021 WebPage Regulatory News
    News

    HKMA Issues Updates on Policy Measures Intended to Ease COVID Impact

    The Hong Kong Monetary Authority (HKMA) published updates on the policy measures that were announced in context of the ongoing pandemic.

    September 21, 2021 WebPage Regulatory News
    News

    ISDA Responds to BCBS Proposal on Treatment of Cryptoasset Exposures

    The International Swaps and Derivatives Association (ISDA), along with several other associations, submitted a joint response to the Basel Committee on Banking Supervision (BCBS) consultation on preliminary proposals for the prudential treatment of cryptoasset exposures.

    September 21, 2021 WebPage Regulatory News
    News

    BIS Quarterly Review Discusses Developments in Fintech and ESG Space

    BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.

    September 20, 2021 WebPage Regulatory News
    News

    BCBS to Consult on Supervisory Practices for Climate Risks by Year-End

    The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards

    September 20, 2021 WebPage Regulatory News
    News

    OCC Identifies Operational Risk Deficiencies in MUFG Union Bank

    The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.

    September 20, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7494