Budapest, 24 October 2016 - The MNB’s Financial Stability Board has decided to introduce the capital buffer for other systemically important institutions and the systemic risk buffer gradually and at a later stage. The capital add-on for systemically important institutions will be introduced in a gradually increasing manner over a four-year period from 2017. The banks that will be required to build the systemic risk buffer to mitigate risks in relation to problem project loans will have to meet their obligation from 1 July 2017, i.e. six months later than originally scheduled. These modifications are aimed at supporting lending.
Potential financial difficulties faced by systemically important institutions may pose a threat to the functioning of the financial intermediary system through contagion effects, and may indirectly lead to problems for the real economy as well. For this reason, the MNB closely monitors their operation and strengthens their resilience to shocks by requiring them to build additional capital buffers. In 2016, the MNB identified eight other systemically important institutions (O-SIIs).
In order to bolster their resilience to shocks, the MNB has set capital buffer requirements for the institutions affected between 0.5 and 2 per cent. They will be required to build these buffers over a period of four years from 2017. The adjustment period ending in 2020 is expected to contribute to faster growth in lending, in addition to enhancing financial stability. The timetable which has now been set is consistent with international regulatory practice.
Scheduling of capital buffer rates for other systematically important institutions
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Institution
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Capital buffer rate
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|||
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For 2017
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For 2018
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For 2019
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For 2020
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|
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OTP Bank Nyrt.
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0.50%
|
1.00%
|
1.50%
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2.00%
|
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UniCredit Bank Hungary Zrt.
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0.25%
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0.50%
|
0.75%
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1.00%
|
|
Kereskedelmi és Hitelbank Zrt.
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0.25%
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0.50%
|
0.75%
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1.00%
|
|
Magyar Takarékszövetkezeti Bank Zrt.
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0.125%
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0.25%
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0.375%
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0.50%
|
|
Raiffeisen Bank Zrt.
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0.125%
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0.25%
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0.375%
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0.50%
|
|
Erste Bank Hungary Zrt.
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0.125%
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0.25%
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0.375%
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0.50%
|
|
CIB Bank Zrt.
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0.125%
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0.25%
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0.375%
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0.50%
|
|
MKB Bank Zrt.
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0.125%
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0.25%
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0.375%
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0.50%
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Note: The identification was based on audited consolidated data as at 31 December 2015. The capital buffer values for 2018-2020 are indicative, as the MNB carries out the identification exercise and the setting of capital buffer rates every year.
Source: MNB.
Simultaneously, the MNB has decided to postpone the introduction of the systemic risk buffer by six months. Accordingly, the institutions will be required to build the systemic risk buffer, introduced to mitigate risks in relation to problem project loans, from 1 July 2017, based on data for the end of the first quarter of 2017. Banks have undertaken significant balance sheet cleaning since the announcement of the capital buffer: the stock of problem loans fell from HUF 820 billion in the third quarter of 2014 to HUF 310 billion at the end of the second quarter of 2016. Nevertheless, the completion of portfolio sales already underway at a number of institutions may suffer a delay, due in part to the clarification of technical details and the selection of suitable buyers. During the prolonged adjustment period following the MNB’s decision, the banks will have an opportunity to wind down their problem exposures, and therefore they may be exempted from the the build-up of the systemic risk buffer. By delaying the introduction of the capital buffer requirement, the MNB aims to support lending.
Magyar Nemzeti Bank