Budapest, 30 June 2021 – Based on the indicators examined by the MNB and in view of the complex economic situation caused by the coronavirus pandemic, the level of cyclical financial systemic risks continues to be low and is expected to remain so. Therefore, the MNB's Financial Stability Board maintains the countercyclical capital buffer rate at 0 percent from 1 July 2021.
The Financial Stability Board (FSB) of the Magyar Nemzeti Bank (MNB) has left the 0-percent countercyclical capital buffer rate applicable in case of domestic exposures unchanged. The main indicator on which the decision is based, the so-called credit-to-GDP gap is still closing, i.e., the size of the loan stock relative to GDP is approaching its estimated equilibrium value; however, the closure is explained by several transient processes that cannot be considered as signs of overheating. On the one hand, due to the pandemic situation, the four-quarter nominal value of GDP used in the calculation of the indicator stagnated in 2020. On the other hand, withheld payments due to the moratorium supported the maintenance of the loan portfolio. In addition, government and central bank programmes continued to play a key role in shaping the still significant new lending. Based on all this, domestic lending cannot be considered overheated. Overall, the set of overheating and vulnerability indicators of the cyclical systemic risk map of the MNB supplementing this indicator also signals an increasing but low level of cyclical systemic risk, even given the persistence of strong lending activity during and after the coronavirus pandemic. In view of all the above, initiating the build-up of the capital requirement is not justified, and no process indicating the need for intervention can be detected at present.
The spread of the global coronavirus pandemic and its recurrent waves have had severely negative economic and financial consequences. The past and possible future effects of the pandemic significantly affect the state and evolution of both the business and financial cycles. This also influences the indicators underlying the decisions related to the countercyclical capital buffer, and the decisions on setting the rate. As a result, the determination of the effective capital requirement and the build-up of the capital buffer may be delayed.
The development of cyclical risks in the domestic financial system may be affected by financial developments in foreign countries where domestic financial institutions have material exposures. Among these, the case of non-EU, so-called third countries should especially be kept in focus, as possibly developing cyclical risks may require certain steps from the MNB with regard to domestic institutions due to the missing EU legal framework in these countries. Accordingly, the MNB monitors the lending processes of third countries that are material for the domestic 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 – containing Albania, Montenegro, Russia, Serbia and Ukraine – and left it unchanged. In relation to the countercyclical capital buffer rates that may be required in relation to exposures to these countries, the MNB will make its decision by the end of this year.
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 domestic exposures on a quarterly basis and the list of material third countries on an annual basis.
Further information on the countercyclical capital buffer and other information necessary for the functioning thereof
Magyar Nemzeti Bank