Budapest, 5 March 2018 – The banks participating in the MNB’s Market-Based Lending Scheme undertook that they would increase their lending to SMEs by nearly HUF 230 billion in 2017. Every bank fulfilled its commitment. As a result, the sector fulfilled its commitment at some 250 per cent. Banks have fully maintained their commitment for 2018 as well, which suggests favourable future developments in lending to the SME sector.
The MNB launched the Market-based Lending Scheme (MLS) in 2016, aimed at facilitating the smooth return to market-based lending after the termination of the Funding for Growth Scheme (FGS) and ensuring sustainable economic growth through SME lending. Within the scope of the MLS and by means of concluding interest rate swaps with commercial banks (LIRS), the MNB developed an incentive system aimed at long-term market-based lending. The credit institutions participating in the scheme undertook to increase their SME lending activity during the given calendar year by one quarter of the face value of the LIRS transaction concluded with the MNB, which can be sustained for up to three years.
In 2016, LIRS transactions to the tune of HUF 780 billion were concluded, which represented commitments of increased SME lending amounting to HUF 195 billion in total. In that year, the participating banks increased their lending to SMEs by more than HUF 300 billion, despite their commitment of HUF 195 billion. Although most banks participating in the MLS exceeded their pledged SME credit growth in 2016, the commitments could not be raised until mid-2017, therefore the commitments for 2017 dropped from HUF 195 billion to HUF 170 billion on account of the (partial) termination of certain LIRS transactions at the beginning of the year.
The Monetary Council decided to launch the second phase of the MLS in May 2017 to allow banks to raise their lending commitments. At the LIRS tender in July, the MNB concluded transactions totalling another HUF 228 billion with the credit institutions, raising banks’ SME lending commitment for 2017 from HUF 170 billion to HUF 227 billion. Thus banks’ lending commitment increased by 34 per cent on average across the banking system, while 3 out of the 9 participating banks at least doubled their commitment.
All 16 banks with LIRS transactions at the end of 2017 met their commitments, increased in several cases. As a result, banks achieved a 250 per cent fulfilment at the sector level, even surpassing the figure from the previous year. Partly attributable to the banks commitments, annual growth rate of corporate loans outstanding reached 10.4 per cent and the growth rate in the SME sector including the self-employed was 12 per cent in 2017.
No credit institution wished to voluntarily lower their commitment for 2018, therefore the commitments of around 6 per cent of total SME loans outstanding may contribute to the stabilisation of the lending dynamics between 5–10 per cent, which is regarded by the MNB as the range necessary for sustainable economic growth.