Featured Product

    MNB Extends Scope of Green Lending, Discusses Bank Carbon Risk Index

    September 01, 2021

    The Hungarian National Bank (MNB) announced that the green preferential capital requirement program for green lending by credit institutions to the corporate sector and local governments is being extended to incorporate further corporate green credit objectives. Thus, banks will now have the opportunity to provide green lending for promoting the development of electromobility and sustainable agriculture and, without restriction to specific industries, for other funding objectives serving environmental sustainability. In addition, green exposures under a green financing framework developed by the debtor or the bank may also be included in the program in any sector.

    Under the green preferential capital requirement program, MNB contributes to increasing the share of green industries and clients in banks’ balance sheets compared to "brown" assets, which are more exposed to sustainability risks. According to the decision of MNB, in the future, credit institutions may pool capital allowances for housing loans and for the provision of funding to companies and local governments currently in effect, thus maximizing their use. Following the decision, a bank active in green financing may utilize capital allowances amounting to 1.5% of its total risk exposure. As an incentive, MNB encourages green lending under the program by waiving part or whole of current year’s capital requirements of environmentally sustainable corporate and local government exposures meeting the conditions laid down in the detailed set of criteria under Pillar 2 of the capital regulation.

    MNB also published a paper that proposes Bank Carbon Risk Index as a simple indicator of climate-related transition risks of bank lending activity based on transaction-level loan data. The underlying assumption is that the higher the greenhouse gas intensity of an economic activity (and so a debtor), the higher its transition risk, because of factors such as increasing future carbon price and greening consumer preferences. The idea is that the greenhouse gas emission of an economic activity is in line with its probability of default and, thus, the climate-related transition risks. Consequently, the risk of a debtor and that of the lending bank can be outlined by mapping greenhouse gas intensities to loan data. The paper introduces the concept of greenhouse gas intensity, presents the methodological background of the indicator, compares the indicator with similar devices, and discusses the trends based on Hungarian data. 


    Keywords: Europe, Hungary, Banking, ESG, Sustainable Finance, Lending, Credit Risk, Bank Carbon Risk Index, Transition Risk, Climate Change Risk, Probability of Default, MNB

    Featured Experts
    Related Articles

    EBA Launches Stress Tests for Banks, Issues Other Updates

    The European Banking Authority (EBA) launched the 2023 European Union (EU)-wide stress test, published annual reports on minimum requirement for own funds and eligible liabilities (MREL) and high earners with data as of December 2021.

    January 31, 2023 WebPage Regulatory News

    EBA Proposes Standards for IRRBB Reporting Under Basel Framework

    The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.

    January 31, 2023 WebPage Regulatory News

    FED Issues Further Details on Pilot Climate Scenario Analysis Exercise

    The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.

    January 17, 2023 WebPage Regulatory News

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News

    EBA Updates Address Basel and NPL Requirements for Banks

    The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.

    December 22, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8700