Budapest, 19 March 2020 – Yesterday the Magyar Nemzeti Bank’s Financial Stability Board took a comprehensive package of financial measures to mitigate the impacts of the emergency situation related to the coronavirus outbreak on the financial intermediary system. The measures will reduce the administrative burden on banks and allow for the flexible application of macro- and micro-prudential rules. This will help to address expected temporary difficulties and maintain the lending capacity of the banking system. The banking system is strengthened by the temporary restriction on the payment of dividends, as well as by the tightening of the regulatory limits applicable to foreign currency funding. In addition, the MNB offers guidance to banks in daily operational issues related to the maintenance of the required service level in the current situation.
In view of the emergency situation related to the coronavirus epidemic and its impact on the financial intermediary system, it is necessary to mitigate the administrative burden on banks in several respects and allow for the flexible application of prudential rules. Therefore the MNB made the following decisions:
- the MNB will provide relief from the maintenance of the systemic risk buffer (SyRB) in relation to commercial real estate project loan exposures until the end of 2020;
- the internal capital adequacy assessment process reviews (“ICAAP reviews”) of banks will be suspended until 30 September 2020, while the presently valid capital adequacy ratios (“TSCR ratio”) expected by the MNB will be maintained, but the institutions may request the ICAAP review to be conducted if they are able to allocate proper resources, and the MNB will make a decision on such requests;
- in the case of a possible violation of the Pillar II capital guidance (“P2G”), the MNB will not apply the set of supervisory tools at its disposal;
- meeting the level of the Minimum Requirement for own funds and Eligible Liabilities (“MREL requirement”) planned for 2020 will be postponed by 6 months;
- the on-site examinations of financial organisations will be postponed by 2 months, and regarding examinations not requiring on-site presence, only the most important ones will be initiated;
- the on-site phases of reviews related to the Internal Liquidity Adequacy Assessment Process (“ILAAP reviews”) will be cancelled until December 31, but the MNB will monitor liquidity more closely based on regular data supplies;
- regarding ongoing retail mortgage loan transactions, the MNB gives a temporary release from value appraisals and the production of notary documents, but they will have to be submitted after the disbursement.
At the same time, in order to strengthen the banking system, the following steps are necessary:
- The MNB requests banks and their owners to make sure that dividends are neither approved, nor paid until the end of September.
- In the Foreign Exchange Funding Adequacy Ratio (FFAR) the weighting of long-term funds will be differentiated by maturity.
- The maximum level of the Foreign Exchange Coverage Ratio (FECR) will drop to 10 per cent from 15 per cent, i.e. get tighter, thus constraining banks’ on-balance sheet currency mismatch.
In addition, the MNB will share with the institutions the key principles it considers important to handle the current emergency situation, regarding the opening hours of bank offices, the communication with customers and the supply of cash to customers.