1 September 2021
The MNB’s green preferential capital requirement programme for green lending by credit institutions to the corporate sector and local governments will be extended. Accordingly, banks will have the opportunity to provide green lending under the programme to promote among others the development of electromobility and sustainable agriculture and, without restriction to specific industries, for other funding objectives serving environmental sustainability.
As part of its Green Programme, the Magyar Nemzeti Bank last December announced its green preferential capital requirement programme for companies and local governments. Under the programme, the Bank contributes to increasing the share of green industries and clients in banks’ balance sheets compared to ‘brown’ assets, that are more exposed to sustainability risks. All this contributes to maintaining the stability of the Hungarian financial system and to the environment-friendly transition of the economy.
As a positive incentive, the MNB encourages green lending under the programme by waiving part or whole of current year’s capital requirements of environmentally sustainable corporate and local government exposures meeting the conditions laid down in the detailed set of criteria under Pillar 2 of the capital regulation.
Based on their balance sheet total, 75 per cent of domestic banks joined the programme in six months. The Bank defined its preferential capital requirement, to be granted for 5 years, first to finance renewable energy production and to purchase green bonds by banks (investments). Within the categories mentioned above, the participating banks provided HUF 121 billion of loans to finance solar power station projects from the start of the programme until 30 June 2021, and provided green bond financing of more than HUF 42 billion, thereby participating in the MNB’s Bond Funding for Growth scheme as well.
In view of the success of the programme, the MNB, following consultations with the partner authorities, trade organisations and credit institutions, will extend the existing programme to incorporate further corporate green credit objectives. Accordingly, in the future credit institutions will also have the opportunity to use the capital allowance through the provision of funding to serve electromibility (e.g. purchases by firms of zero-emission road transport or passenger vehicles) as well as sustainable agriculture and food industry (e.g. the development of apiaries and farms participating in the organic farming support programme, and purchases of precision machinery by agricultural enterprises serving sustainability). In addition, green exposures under a green financing framework developed by the debtor or the bank may also be included in the programme in any sector.
According to the Bank’s decision, in the future credit institutions may pool capital allowances for housing loans and for the provision of funding to companies and local governments currently in effect, thereby maximising their use. Following the decision, a bank active in green financing may utilise capital allowances amounting to 1.5 per cent of its total risk exposure.
The detailed set of criteria is available at the following link (in Hungarian). (Note: an English summary will be published in the coming days).
Magyar Nemzeti Bank