Budapest, 22 June 2023 – In view of the turnaround in the housing market and the significant correction in residential real estate overvaluation, the Financial Stability Board of the MNB postpones the activation of the Countercyclical Capital Buffer rate of 0.5 percent planned from 1 July 2023 by one year to 1 July 2024. In addition, it preventively reactivates the Systemic Risk Buffer aimed at risks related to commercial real estate loans (especially non-performing loans). The measures aim to strengthen the resilience of banks to shocks.
The Financial Stability Board (PST) of the Magyar Nemzeti Bank (MNB) sets the Countercyclical Capital Buffer (CCyB) rate applicable to exposures in Hungary at 0 percent from 1 July 2023 and at 0.5 percent from 1 July 2024.
During the rate review in June 2022 , the FSB decided to increase the CCyB rate applicable to domestic exposures for the first time since 2016, which was justified by the cyclical systemic risks and the high and rising level of housing market overvaluation. However, the high inflation, the uncertain macroeconomic environment and the strict monetary conditions resulted in a significant reduction of cyclical systemic risks, including the risks related to the overheating of the residential real estate market, which was previously assessed as high risk, in the second half of 2022, which is expected to continue in 2023. In view of this, the FSB decided to postpone the activation of the Countercyclical Capital Buffer rate by one year. Accordingly, instead of 2023, the countercyclical capital buffer rate of 0.5 percent may come into force on 1 July 2024. The capital and liquidity position of the banking system remains strong. The measure ensures the maintenance of the significant free capital buffers of the banking system.
Due to the special risks seen in global commercial real estate markets, the MNB decided to reactivate the Systemic Risk Buffer (SyRB), which was suspended at the outbreak of the coronavirus pandemic, for preventive purposes. By using the SyRB, the MNB successfully supported the cleaning of problematic commercial real estate loans from bank balance sheets before the coronavirus pandemic, as well as the strengthening of banks' shock resistance. The reactivation of the instrument, which was suspended during the pandemic, is justified by the abatement of the pandemic, the resumption of commercial real estate lending, the still low but increasing risks seen in global commercial real estate markets, and the risk signals of international organizations (e.g. the European Systemic Risk Board). The capital buffer would be required in case of a build-up of excessive or problematic exposures to the commercial real estate market at individual institutions, so its introduction in the current period, which is still characterized by low risks, will preventively strengthen banks’ ability to withstand shocks and, if necessary, encourage the appropriate adjustment of their portfolios. Accordingly, the MNB plans to prescribe Systemic Risk Buffer rates from 1 July 2024, also ensuring sufficient adjustment time for banks. The MNB will discuss the details of the application of the SyRB with the market participants during the summer and, in consultation with them, will develop the detailed conditions by the fall of 2023.
With these decisions on capital buffers, the central bank ensures that the institutions' ability to withstand shocks increases proportionately to the risks in an uncertain environment.
The MNB will continue to continuously monitor systemic risks in the banking sector and prescribe the maintenance of additional capital buffer requirements depending on their development.
Information on the application of the systemic risk capital buffer to date
Magyar Nemzeti Bank