16 December 2020
The papers published in the December issue of the Magyar Nemzeti Bank’s scientific journal discuss government interest rate savings, the MNB's liquidity and financing regulations, the export activity of small and medium-sized enterprises in the Hungarian FinTech sector, and the management of foreign exchange liquidity disturbances in the banking system of the euro area.
Gergely Kicsák, Dávid Benkő and Noémi Végh examined the decline in government interest expenditure in Hungary by nearly a half between 2013 and 2019, which is the second largest drop in proportion to GDP in the European Union. To analyse the reasons for the decline in expenditure, the change in interest expenditure was divided into factors. The results showed that the decline in government bond yields played a dominant role in the significant decrease in Hungary’s interest expenditure even compared to the EU, which was also supported by central bank programmes, disciplined fiscal policy, favourable Hungarian macroeconomic processes and the international environment. Favourable developments in interest expenditure have also been supported by the steady decline in the debt ratio, which has been unique in the EU since 2011.
In their study, Tamás Borkó, Evelyn Herbert, Barnabás Székely and Péter Szomorjai examined the approximate effects of the pre-crisis application in 2007-2008 of banking liquidity and funding requirements introduced after 2012 would have had. The authors demonstrated that the toolkit could have been an effective barrier to the emergence of banking system vulnerabilities. The backtesting showed that regulations could have been able to slow down the build-up of foreign currency loans with severe effects in the national economy and society and to mitigate the risks associated with excessive lending by limiting risky bank financing practices.
Péter Fáykiss and Lívia Ónozó examined SMEs operating in the Hungarian FinTech sector with a focus on export activity. In the course of the examination, the authors used cluster analysis to identify well-separable groups of FinTech companies and to determine the most important factors affecting the export activities of FinTech companies acting in Hungary using logistic regression. According to their results, companies can be divided into three well-separable clusters, one of which is specifically export-oriented. Based on the authors’ analysis, it can also be concluded that higher value added and larger size increase the probability of FinTech companies’ export activity.
A study by Gábor Dávid Kiss, Gábor Zoltán Tanács, Edit Lippai-Makra and Tamás Rácz examined the background of dollar-euro foreign exchange swaps conducted by the European Central Bank (ECB) with euro area banks. They reviewed the theoretical background of foreign exchange swaps, with a special focus on dollar swaps between leading central banks, which have been used since December 2007 to address liquidity problems in international capital markets. By applying a structural VAR model the authors analysed the factors that influenced the ECB's dollar allocation within the euro area, highlighting the importance of international dollar liquidity needs, borrowing outside the euro area, unconventional monetary policy and the profitability of the banking system.
In her essay, Eszter Boros dealt with climate stress tests, a comprehensive way to take stock of the financial risks associated with climate change. The issue of climate change, including regulatory expectations, is becoming increasingly urgent for credit institutions as well. Stress tests, which have been widely incorporated into banking practice in recent years, may prove to be a good tool for assessing relevant impacts. However, in order to adapt the frameworks, a number of theoretical methodological difficulties have to be faced. The essay aims to provide help in this regard by reviewing the analysis process, highlighting the most pressing issues that arise at some building blocks.
In addition to these, the December issue of the Financial and Economic Review contains three book reviews and two conference reports.
This publication is available on the website of the Financial and Economic Review:
We wish you a very pleasant reading.
Magyar Nemzeti Bank