Budapest, 20 December 2019 – The benchmark credit-to-GDP gap as well as the other complementary overheating and vulnerability indicators point to a slowly growing but still low level of cyclical systemic risks. Growing credit market activity takes place in a healthy structure in both the household and the corporate segments; therefore, the increase of the countercyclical capital buffer rate is still not justified. As a result, the Financial Stability Council maintains the countercyclical capital buffer rate at 0 percent as of 1 January 2020. Considering the dynamics of lending, especially regarding the real estate and corporate lending processes, the MNB will continue to closely monitor credit market developments.
The Financial Stability Council (FSC) of the Magyar Nemzeti Bank (MNB) has not changed the 0-percent countercyclical capital buffer rate applicable in case of domestic exposures. The increase of the capital requirement is not justified, either based on the level and dynamics of the benchmark credit-to-GDP gap or on the additionally monitored cyclical overheating and vulnerability indicators. While domestic lending processes imply an ascending phase of the credit cycle, the net credit outflow cannot be considered excessive, either overall or in the retail and corporate segments separately. The speed of the credit outflow, the volume of the outstanding stock and its ratio to GDP, as well as the sounder structure of credit portfolios compared to earlier periods indicate sustainable lending processes. The MNB sees further room for healthy lending and gradual financial deepening, but continues to closely monitor credit market processes, particularly regarding the real estate and corporate lending tendencies.
Furthermore, the MNB regularly monitors the cyclical systemic risks of non-European Union (EU) third countries material for the Hungarian banking system, since the financial developments in these economies may affect risks of the Hungarian banking system as well. In its recent annual review, the MNB complemented the list of material third countries for the Hungarian banking system consisting of Montenegro, Russia, Serbia and Ukraine with Albania. Based on the evaluation by the MNB – and by the European Systemic Risk Board for Russia as a material country at the EU level –, the current level of cyclical systemic risks in these countries is low, and therefore the prescription of a countercyclical capital buffer for exposures in those countries is still 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 quarterly in case of Hungarian exposures and annually in case of exposures related to material third countries.
Magyar Nemzeti Bank