Due to the transition risks related to climate change and other environmental anomalies, the Central Bank of Hungary (MNB) considers it desirable that the share of environmentally sustainable (green) industries and customers in bank balance sheets should increase compared to “brown” exposures, ie. those exposed to stricter environmental regulations, and which could therefore well be riskier in the long run.
To this end, starting with the ICAAP reviews of 2021, MNB intends to improve the risk profile of the banking sector and encourage green lending through a positive incentive, by releasing a part or all of the capital requirements prescribed in Pillar 2 of capital regulation for environmentally sustainable corporate and municipal exposures, that meet the criteria set out in the detailed terms and conditions. MNB provides the preferential capital requirements for 5 years.
The preferential capital requirement program will initially cover the financing of renewable energy production (as defined by the EU Taxonomy), as well as the purchase of (investment in) green bonds, but this list of eligible exposures will gradually expand in 2021.
MNB will consult about the details of the related reporting requirements with the banks in the coming weeks.
Green Corporate and Municipal Financing Capital Requirement Discount Framework (only available in Hungarian)