The soundness of systemically important financial
institutions has crucial influence on banking sector efficiency. In autumn 2015
the MNB identifined nine domestic systemically important financial institutions
and from 1 January 2017 set additional capital requirement for them. The
adequately long phase-in period ensures that market participants will be able
to easily comply with the new capital requirement while they boost their
lending activity. The additional capital requirement is enhancing the stability
of the domestic banking sector through improving the institutions’ resilience
to shocks.
The experience of the financial crisis has highlighted the fact that certain institutions are of particular significance by virtue of the role they play in the financial intermediary system and in the provision of financing to the real economy. When under stress, these institutions may pose a threat to the entire financial system and, indirectly, jeopardise the smooth functioning of the real economy. Therefore, following the crisis it has become crucially important to strengthen the resilience of global and other (domestic) systemically important institutions, which can be achieved by imposing additional capital buffer requirements. Global systemically important institutions will be identified at international level, while other systematically important institutions will be identified, and their additional capital requirements will be set, at national level.
In the Member States of the European Union, the range of so-called other systemically important institutions (credit institutions and investment firms) will have to be identified by 1 January 2016 at the latest. In order to harmonise the identification procedure at EU level, the European Banking Authority has issued Guidelines, on which the MNB has also relied during the identification process.
The MNB’s Financial Stability Board (FSB) identified nine Hungarian banks as other systematically important institutions. In order to improve their resilience to shocks and strengthen investors’ and consumers’ confidence in financial markets in autumn 2015 the FSB decided to introduce an additional capital buffer requirement. At consolidated level, other systemically important institutions will be required to hold an additional capital buffer of maximum 2 per cent of their total risk-weighted assets. This buffer will have to be in the form of Common Equity Tier 1 (CET1) capital and sits on top of other buffers.
The credit institutions concerned will have to meet the new capital buffer requirement from 1 January 2017. The adequately long phase-in period ensures that market participants will be able to easily comply with the new capital requirement while they boost their lending. Capital buffer requirements for other systemically important institutions will be set individually, in the form of MNB Decrees, in the third quarter of 2016, based on audited data for the end of 2015. Afterwards, the MNB will review annually the range of systemically important institutions and individual capital buffer rates. The Bank has provided advance information to the European authorities and market participants about the new capital requirement.
Below is a list of entities identified as other systemically important institutions and the capital buffer rates expected to apply to them from 1 January 2017: