Budapest, 31 March 2022 – An increase in the countercyclical capital buffer rate for domestic exposures is not currently warranted given the current level of cyclical systemic risk. In line with this, the MNB's Financial Stability Board has left the countercyclical capital buffer rate at 0 per cent after 1 April 2022. In the coming quarters, risks from lending and thus the need to impose a capital buffer may also be significantly affected by the economic effects of the Russia-Ukraine war.
The Financial Stability Board (FSB) of the Magyar Nemzeti Bank (MNB) left the countercyclical capital buffer rate applicable to domestic exposures unchanged at 0 per cent.
The narrowing of the country-specific benchmark additional credit-to-GDP gap developed for the assessment of the domestic credit cycle continued into the third quarter of 2021, but the gap remained negative at -0.7 percentage points. The credit-to-GDP ratio underlying the gap was 44.7 per cent in the quarter under review, up again from the previous quarter, but still showing low credit penetration. Based on estimates for the fourth quarter of 2021 and the first quarter of 2022, the credit-to-GDP gap is not expected to close further. Until the first quarter of 2022, the moderately increasing level of cyclical systemic risks which do not require intervention was indicated by the growth of credit market activity supported by government and central bank measures and the relatively rapid recovery of the domestic economy from the shock caused by the coronavirus pandemic. The overheating and vulnerability indicators of the cyclical systemic risk map, in particular the indicators relating to corporate lending, the banking system’s leverage and the real estate price-to-income ratio, also indicated upside risks that do not yet warrant immediate intervention.
Earlier, based on lending trends and real estate market developments, as well as the rapid recovery and the robust economic growth, cyclical systemic risks were expected to build up in the medium term, pointing in the direction of regulatory intervention. However, the complex economic situation resulting from the uncertain duration of the Russo-Ukrainian war, which began at the end of February 2022, and the economic sanctions imposed in connection with it, could have a major impact on the development of cyclical risks. This potential impact is currently difficult to quantify; thereby, the close monitoring of economic, financial systemic and risk developments is necessary. The decision to apply a possible positive countercyclical capital buffer rate should also be made in the coming quarters accordingly.
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 applicable to domestic exposures on a quarterly basis.
Magyar Nemzeti Bank