MNB ensures long-term stable operation by rebuilding capital buffers of systemically important banks

Budapest, 1 December 2021 – The MNB's regular annual review in autumn 2021 identified seven banking groups operating in Hungary as systemically important. Due to the extraordinary circumstances caused by the coronavirus epidemic, the capital buffers temporarily released by the MNB in 2020 will have to be gradually rebuilt by these credit institutions in three years starting from 2022. Graduality supports long-term financial stability while maintaining bank lending to the real economy.

In 2021, the Magyar Nemzeti Bank (MNB) reassessed the systemic importance of domestic credit institutions based on end-2020 data, and as a result identified seven banking groups as systemically important this year instead of the eight institutions identified in the previous years. The change in the group of affected credit institutions stemmed from the fact that Magyar Bankholding Zrt. started its effective operation on 15 December 2020 with the participation of MTB Magyar Takarékszövetkezeti Bank Zrt., MKB Bank Nyrt. and Budapest Bank Zrt. Due to the tighter integration between the institutions expected in 2022, the MNB included the group into this year's identification process at the highest level of consolidation. The bank holding is the second largest group among Hungarian banking institutions in terms of total assets, loans and deposits; also, its role in serving critical market segments, its extensive branch network, its regional embeddedness and its position in the interbank network also contribute to its significance.

Due to the extraordinary economic conditions resulting from the coronavirus epidemic, the MNB released the capital buffers required for Other Systemically Important Institutions (O-SII) as of 1 July 2020, which supported the maintenance of lending capacity and the prevention of a potential contraction in credit supply. Since then, the MNB has assessed the capital position and lending activity of systemically important banks as sufficient to prescribe once again the phase-in of the buffers along the path already envisaged in 2020 from 2022 onwards. Systemically important banks will need to rebuild their buffers over three years to strengthen their loss absorbing capacity in a proportionate and gradual manner. In 2022 and 2023, the transitional buffer rates will increase by one-quarter of the expected final rates, and from 2024 onwards, the MNB will expect compliance with the intended final buffer rates. The MNB will modify the final buffer rates if material future changes in the systemic importance of the credit institutions necessitate adjustments during the annual revisions.

The potential financial distress of systemically important institutions (O-SIIs) may not only affect their clients adversely, but may also pose a threat to the functioning of the financial intermediary system as a whole through contagion effects, and may indirectly lead to turbulences in the real economy as well. For this reason, the central bank, acting in its macroprudential capacity, defines and annually reviews the list of domestic systemically important institutions, and prescribes capital buffers to them based on their significance to decrease the probability of their default.

Scores used for the identification of systemically important credit institutions and their capital buffer rates

MNB Note: The identification was based on audited consolidated data as of 31 December 2020.
Source: MNB

Detailed information on the identification of systemically important institutions

Magyar Nemzeti Bank