The MNB introduced its two-year collateralised loan tender in March 2012 with the aim of providing long-term funding to credit institutions without a term premium. The facility is intended both to help banks to strengthen their balance sheets and to provide a safety net to preserve the capacity to lend in the event of a liquidity shock. The MNB is constantly developing its monetary policy instruments in order to be able to respond adequately to changes in the external environment, and is therefore changing the terms and conditions of use of the facility.
The stock of lending by Hungarian banks to the corporate sector fell by some HUF 211 billion in the first half of 2012, reflecting the unfavourable macroeconomic environment. In view of these developments, the Bank has changed the criteria for counterparties on the amount and composition of corporate sector loans: from October the amount of corporate refinancing loans, playing an increasingly important role in the economy, will be taken into account. At the same time, the amount of commercial real estate loans, representing risks to growth and financial stability, will not be taken into consideration.
The requirement on the outstanding amount of loans will also be eased from 2 October 2012. Accordingly, banks will be able to use the facility on the condition that they undertake to maintain the amount of lending at 30 June 2012 levels, instead of end-2011 levels.
Overall, this means that under the new scheme the combined stock of credit institutions’ corporate loans and net refinancing loans, reduced by the amount of outstanding commercial real estate loans (hereinafter adjusted corporate loan stock) may not fall relative to the new reference date.
With effect from 2 October 2012, the MNB will introduce limits in order to promote bank lending to the corporate sector. Accordingly, an upper limit on the initial availability of the facility at 50 per cent of the adjusted corporate loan stock outstanding as at 30 June 2012 will be imposed; however, at individual bank level the size of collateralised loans available will be raised by the amount of the increase in the adjusted corporate loan stock.
In order to stimulate lending to the corporate sector, the MNB will ease the sanctions applicable in case of non-fulfilment of the terms of the tender with effect from October 2012.
These amendments do not apply to loans taken out before 2 October 2012. Click here to view the detailed terms and conditions of the tender.
Magyar Nemzeti Bank