Budapest, 22 December 2021 –The development of the examined indicators shows an increasing level of cyclical systemic risks, which does not yet justify the imposition of a countercyclical capital requirement. In line with this, the MNB's Financial Stability Board left the countercyclical capital buffer rate at 0% after 1 January 2022.
The Financial Stability Board (FSB) of the Magyar Nemzeti Bank (MNB) left the countercyclical capital buffer rate applicable to domestic exposures unchanged at 0 percent. In addition, the FSB did not adjust the 0-percent countercyclical capital buffer rates applicable to the exposures of the domestic banking system in material third countries.
The narrowing of the country-specific benchmark additional credit-to-GDP gap developed to assess the domestic credit cycle came to a halt, leaving the gap negative at -1.7 percentage points. The credit-to-GDP ratio underlying the gap was 44.2 percent in the quarter under review, declining slightly for the first time in two years due to the GDP growth rapidly correcting as the economy relaunched. Historically, credit penetration is still low. However, on the basis of estimated data, credit-to-GDP is expected to converge and gradually exceed its estimated equilibrium value at the beginning of next year. This is mainly explained by the growth of the monitored loan stock, which exceeds the four-quarter nominal GDP growth rate. The increase in credit market activity supported by government and central bank measures, the relatively rapid recovery from the conjunctural shock resulting from the coronavirus epidemic and the set of overheating and vulnerability indicators of the cyclical systemic risk map also point to the growing level of cyclical systemic risks, which does not yet warrant immediate intervention. Based on lending trends and real estate market developments, cyclical systemic risks are expected to build up in the medium term due to the rapid recovery of the economy and the significant economic boom.
The MNB regularly monitors and evaluates the cyclical systemic risks of third countries outside the European Union (EU) that are material for the domestic banking system. On the one hand, the financial processes of these countries may also have an impact on the development of the risks of the Hungarian banking system; on the other hand, the authorities of these countries operate in a different legal and prudential framework from those of EU Member States. During its 2021 review, the MNB did not change the list of material third countries (Albania, Montenegro, Russia, Serbia and Ukraine) for the domestic banking system. According to the assessment, the level of cyclical systemic financial risks does not justify the imposition of a countercyclical capital requirement in any of the countries examined. Similarly to the domestic situation, because of the effects of the pandemic and the subsequent rapid economic recovery, the determination of the effective capital requirement for domestic banking system exposures in material third countries is not justified.
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 rates applicable to material third countries annually.
Magyar Nemzeti Bank