MNB Publications Address Aspects of Lending and Green Finance

Key highlights of these recent developments follow:

• The Lending Survey, which was conducted in the first quarter of 2022 reveals that banks are expecting tightening conditions and slowing demand in several segments of the credit market. Based on the responses to the Lending Survey, the first quarter was characterized by unchanged credit conditions and credit demand in the corporate credit market. On a net basis, 36% of banks tightened terms of commercial real estate loans already in the first quarter of the year due to industry-specific problems and declining risk tolerance. Looking ahead, about a quarter of banks plan to tighten lending conditions due to the uncertain economic outlook. 
• MNB amended its recommendation on the treatment of overdue retail creditors. The new requirements of the recommendation now cover retail mortgages as well as all retail credit, loan, and financial leasing agreements affected by late payment. The recommendation sets out the amount of late payment required to contact the customer and defines the communication channels as well as the timing and frequency of the contacts. The recommendation also provides for transparent communication and tariffs for dealing with late payment. MNB expects a financial institution to create a sub-page on its website on dealing with payment difficulties and late payments, where all information and briefings can be accessed in one place, in a well-structured and transparent way for debtors. These revised recommendations will come into effect from September 01, 2022.
• The recently published Green Financial Report highlights significant growth in green financial markets. The report states that Hungary is in the middle of the European Union in the field of competitive energy use and a green economy, but a climate-friendly transition will require an annual mobilization of 4.8% of GDP by 2050. According to the MNB's new bank climate risk network published in the report, the climate exposure of domestic credit institutions does not differ significantly from that of its European counterparts. The report discusses the need to speed up compliance with the MNB's green recommendation for some banks. MNB plans to announce deadlines this summer as to when it expects to comply with each of the recommendation points.
• MNB and the European Investment Bank (EIB) entered into a cooperation agreement aimed at supporting the EIB's long-term forint-denominated lending activities to domestic economic agents. The cooperation will enable green projects in Hungary to receive forint financing on more favorable terms and help support environmentally sustainable economic growth, post-epidemic economic recovery, and domestic climate protection investments. EIB may enter into a long-term euro-forint interest rate hedging transaction with MNB to provide fixed-rate forint loans to its Hungarian customers with a maximum maturity of 20 years.

Keywords: Europe, Hungary, Banking, Lending, Green Finance, Credit Risk, ESG, Climate Change Risk, Sustainable Finance, Green Economy, Mortgage Lending, Loan Repayment, EIB, MNB