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

    Featured Experts
    Related Articles

    BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks

    The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.

    March 13, 2023 WebPage Regulatory News

    OSFI Finalizes on Climate Risk Guideline, Issues Other Updates

    The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.

    March 12, 2023 WebPage Regulatory News

    BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending

    BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.

    March 03, 2023 WebPage Regulatory News

    HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks

    The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.

    March 02, 2023 WebPage Regulatory News

    BCBS Report Examines Impact of Basel III Framework for Banks

    The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.

    February 28, 2023 WebPage Regulatory News

    PRA Consults on Prudential Rules for "Simpler-Regime" Firms

    Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.

    February 28, 2023 WebPage Regulatory News

    DNB Publishes Multiple Reporting Updates for Banks

    DNB, the central bank of Netherlands, updated the list of additional reporting requests and published additional data quality checks and XBRL-Formula linkbase documents for the first quarter of 2023.

    February 28, 2023 WebPage Regulatory News

    NBB Sets Out Climate Risk Expectations, Issues Reporting Updates

    The National Bank of Belgium (NBB) published a communication on climate-related and environmental risks, issued an update on XBRL reporting

    February 24, 2023 WebPage Regulatory News

    EBA Updates Address Securitization Standards and DGS Guidelines

    The European Banking Authority (EBA) published the final draft of the regulatory technical standards that set out conditions for assessment of homogeneity of the underlying exposures in simple, transparent, and standardized (STS) securitizations.

    February 21, 2023 WebPage Regulatory News

    FSB Publishes Letter to G20, Sets Out Work Priorities for 2023

    The Financial Stability Board (FSB) published a letter intended for the G20 Finance Ministers and Central Bank Governors, highlighting the work that FSB will take forward under the Indian G20 Presidency in 2023

    February 20, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8793