Budapest, 6 July 2021 - The Monetary Council reviewed and approved the Magyar Nemzeti Bank's (MNB) Green Monetary Policy Toolkit Strategy. The MNB's mission is to implement monetary policy tools that - without jeopardizing its primary objective – would ensure long-term environmental sustainability, and thereby contribute to Hungary's sustainable convergence. The newly adopted strategy serves as a framework for the long-term operation of the central bank, under which the MNB will continuously examine how certain tools of the monetary policy can help to achieve price stability and environmental sustainability objectives. As the first steps, in line with the strategy, the Monetary Council has decided to launch two new programmes to promote and boost green mortgage lending.
Environmental sustainability is one of the biggest challenges of the 21st century. As climate change has implications for price stability, financial stability as well as sustainable convergence, it is well-justified for central banks to address it as a matter of priority.
In recent years, the MNB has taken several steps to promote the development of green financial markets as well as to share environmentally conscious consumer attitudes, thus contributing to the fight against climate change. As a milestone, on 28 May 2021 the Hungarian Parliament decided to modify the Act on the Magyar Nemzeti Bank (Act) and include the support of the Government’s policy linked to environmental sustainability as one of the Bank’s mandates. Therefore, in line with this new task set out in Act, the MNB's mission is to implement monetary policy tools that - without jeopardizing its primary objective – would ensure long-term environmental sustainability, and thereby contribute to Hungary's sustainable convergence.
Environmental sustainability considerations do not affect the general orientation of monetary policy. The MNB's goal is to ensure that the monetary policy tools can efficiently support the transition towards a sustainable economic development and convergence, while price stability remains the primary objective. In line with this, the strategic document on Sustainability and Central Bank Policy - Green Aspects of the Magyar Nemzeti Bank's Monetary Policy Toolkit - adopted today by the Monetary Council - presents a comprehensive framework of opportunities and possible directions in which the central bank can incorporate sustainability considerations into its monetary policy instruments. As it is set out in the strategic document, the MNB - within the framework set by the Act and without compromising the achievement of its other objectives - aims to support sustainable economic transformation, increase climate-resilience of the financial system as well as to raise consumer and social awareness, all of which would help to achieve climate targets. The MNB also strive to promote best practices and to assess the climate impact and exposure of its monetary policy instruments.
Housing market is among the top priorities when measures related to energy efficiency and environmental sustainability considerations are weighted. However, recent survey conducted among domestic banks shows that green aspects are currently not integrated into the pricing methods of mortgage loans and there is no dedicated green loan product available either. With the aim of boosting green mortgage lending, the Monetary Council has decided to launch the Green Mortgage Bond Purchase Programme and the FGS Green Home Programme as the first steps of the implementation of the new strategy.
1. The strategic goal of the Green Mortgage Bond Purchase Programme is to contribute to the development of the domestic green mortgage bond market through targeted purchases and, through this, encourage green mortgage loan activities. This could indirectly support the construction of energy-efficient real estate, thereby contributing to a healthier housing market, while at the same time this may also shape environmentally conscious consumer behaviour. The MNB requires issuers to follow recognized international standards, that will help to build a liquid and transparent green mortgage bond market. The programme is also in line with the modification of the Mortgage Funding Adequacy Ratio (MFAR), therefore the MNB will encourage the issuance of green mortgage bonds on both the demand and supply sides. The Monetary Council has decided that the MNB will review the programme when the HUF 200 billion purchase volume has been reached. In addition to the launch of the Green Mortgage Bond Purchase Programme, the Monetary Council also decided to re-launch the Mortgage Bond Rollover Facility for mortgage bonds without green rating that would help to preserve market stability.
2. To further encourage green mortgage lending, the MNB will launch the Green Home Programme in October 2021 with a total limit of HUF 200 billion as part of the Funding for Growth Scheme (FGS). As in the previous phases of the FGS, the MNB will provide refinancing operation to credit institutions at 0% interest, which will be lent to residential customers at a maximum of 2.5%, fixed interest rate until the end of the maturity period. Under the scheme, loans of up to HUF 70 million and a maximum term of 25 years can be granted for constructions or purchases of new, highly energy-efficient residential real estates.
Further details of the programmes will be discussed with market participants in the coming weeks.