MNB Issues Multiple Regulatory Updates in September 2021
The Financial Stability Board of the central bank of Hungary (MNB) left the countercyclical capital buffer rate applicable to domestic exposures unchanged at 0%. MNB is also expanding its green corporate and municipal capital requirement discount program for credit institutions. Under the program, MNB encourages green lending by releasing part or all of the annual capital requirement for environmentally sustainable corporate and municipal exposures that meet the conditions set out in the detailed terms and conditions in Pillar 2 of the capital regulation.
In half a year, based on their balance sheet total, 75% of the domestic banks joined this discount program. MNB provides the capital requirement discount for five years. Following the success of this program and following the consultations with partner institutions, professional organizations, and credit institutions, MNB plans to expand the program to further corporate green credit targets. According to the decision of the central bank, credit institutions may continue to consolidate and make maximum use of the existing capital benefits provided for housing loans and corporate and municipal financing. Thus, a bank active in green financing will be able to benefit from a capital discount of up to 1.5% of its total risk exposure.
Another development in September relates to the MNB conducting a thematic study to review the application of the regulations related to the repayment moratorium at 16 banks and housing savings funds. The examined financial institutions account for a good 90% of the retail loan portfolio and are also the most important players in connection with the moratorium. In the study involving 16 financial institutions, MNB will review how credit institutions will modify the maturity of the retail loan agreements concerned after the expiry of the repayment moratorium. An additional financial burden is borne by the customer who has an adequate income, but does not step out of the moratorium and start repaying. The principal amount of the loan with a customer also accrues interest during the payment stop. The purpose of the study is to review how the concerned credit institutions will change the maturity of the retail credit agreements following a withdrawal or expiry of the repayment moratorium, in accordance with the relevant legal requirements. To this end, the central bank also commented on about 750 pages of consumer information documents drafted by financial institutions, initiated a number of amendments, and checked their adequacy. The thematic study is expected to be completed in the future as it monitors the preparation of credit institutions for these tasks and their implementation.
Keywords: Europe, Hungary, Banking, Green Loans, Sustainable Finance, ESG, CCyB, Regulatory Capital, Pillar 2, CRR, Credit Risk, Basel, Loan Moratorium, Loan Repayment, COVID-19, MNB
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