Budapest, 28 June 2019 – The credit market is growing in a sound structure and at a sustainable pace; therefore, using the countercyclical capital buffer for increasing the shock absorbing capacity concerning systemwide overheatedness is still not justified. The level of cyclical systemic risks in view of current lending and real estate market tendencies is low; therefore, based on the decision of the Financial Stability Council, the 0-percent countercyclical capital buffer remains unchanged from 1 July 2019.
The Financial Stability Council (FSC) of the Magyar Nemzeti Bank (MNB) has decided to maintain the countercyclical capital buffer rate applicable to domestic exposures at 0 percent. Based on the cyclical overheating and vulnerability indicators for the financial system, it is not justified to impose a countercyclical capital buffer. While the dynamic domestic lending processes imply an ascending phase of the lending cycle, the net credit outflow cannot be considered excessive either overall or in the retail and corporate segments separately. Both the speed of credit outflow and the absolute and relative volume of outstanding stock, as well as the sounder structure of credit portfolios compared to earlier periods indicate sustainable lending processes. In an EU-wide and regional comparison, further room is available for the expansion of domestic lending and gradual financial deepening.
The purpose of the countercyclical capital buffer is to increase the stability and resilience of the financial intermediary system across credit cycles. The MNB reviews the rate of the countercyclical capital buffer applicable to Hungarian exposures quarterly, and the rates for exposures in material third countries annually. No change is expected in the buffer rate over the forthcoming one-year horizon given the current trends, which may support the sustainable lending activity of credit institutions.
The development of cyclical risks in the domestic financial system may be affected by financial developments of non-EU, so-called third countries where financial institutions licenced in Hungary have material exposures. Accordingly, the MNB monitors the developments in lending in material third countries for the Hungarian banking system and, if necessary, prescribes a countercyclical capital buffer rate for the exposures of domestic credit institutions in those countries. The MNB reviewed the list of third countries that are material for the domestic banking system and identified Montenegro, Russia, Serbia, Ukraine and as new country, Albania, as such. In relation to the countercyclical capital buffers that may be required for exposures to these countries, the MNB will make its decision by the end of the year.
Magyar Nemzeti Bank