Budapest, 11 January 2019 – In order to further boost the mortgage bond market and strengthen credit institutions’ long-term forint funding, the MNB has revised the Mortgage Funding Adequacy Ratio (MFAR) regulation. In addition to raising the required MFAR level to 25 percent, the amendment will increase the required minimum maturity of accepted funds to 3 years and strengthen the quality requirements of eligible mortgage bonds. The amendments enter into force in two phases, on 1 February 2019 and on 1 October 2019, this allows credit institutions to prepare properly for the expected changes.
The regulation, which is in effect from 1 April 2017 and currently requires an increased minimum level of 20 percent since 1 October 2018, ensures the long-term financing of forint household mortgage loans in the banking sector with mortgage-backed long-term forint funds.
The amendments adopted by the FSC come into force in two steps. In effect from 1 February 2019, the de minimis limit relating to the mortgage portfolio will be raised to HUF 10 billion due to the dynamic growth of the domestic mortgage lending market. On 1 October 2019, the increase of the required MFAR-level to 25 percent, a raise of the required original maturity of accepted funds to 3 years, the requirement of credit rating of mortgage bonds, their issuer or guarantor to be eligible for the MFAR, and an amendment further incentivising market making for mortgage bonds will come into effect.
Overall, the aim of the MNB is to ensure that, along with the strengthening of long-term funding, the domestic mortgage bond market becomes deeper, more liquid and attractive to a wider range of investors. The text of the MNB decree has been published in the Hungarian Gazette.
Further information on the macroprudential instruments of the central bank addressing liquidity and financing risks can be found here.
Magyar Nemzeti Bank