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.
Keywords: Europe, Hungary, Banking, Macro-Prudential Policy, CCyB, Systemic Risk Buffer, Climate Change Risk, ESG, COVID-19, MNB
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
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.
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