Budapest, 20 September 2024. – The MNB has decided to set a single de minimis threshold for its macroprudential financing requirements aimed at external vulnerabilities to exempt small-sized banks and branches entering the market and do not pose systemic risk. Furthermore, in relation to the mortgage funding adequacy ratio (MFAR) regulation, it has decided to postpone for an indefinite period the green requirement for foreign currency mortgage bond issues envisaged from 1 October 2024, due to the still uncertain capital market environment.
Since 1 July 2022, mortgage-based funds denominated in foreign currency are accepted in the calculation of the mortgage funding adequacy ratio (MFAR) subject to certain restrictions. In the case of these funds, to enforce and strengthen the sustainability goals, only green foreign exchange liabilities would have been acceptable from autumn of 2024.
However, considering the still uncertain market environment, the still low ratio and slow recovery of loan portfolios that can be used as collateral and considered green, as well as the administrative difficulties of raising funds and appearing on the foreign currency mortgage bond markets, further postponement of the requirement that will enter into force on 1 October 2024 has become justified. The amendment supports banks’ compliance with the MFAR regulation in a different economic environment than before and promotes the exploitation of financial stability benefits of denomination and investor diversification.
The MNB also decided to exempt small-sized banks and branches that do not pose systemic risk from complying with the macroprudential financing requirements aimed at short-term external vulnerabilities (foreign exchange funding adequacy ratio - FFAR, foreign exchange coverage ratio - FECR, interbank funding ratio - IFR). In the case of the IFR, the existing de minimis limit will be increased, while in case of FFAR and FECR, a new de minimis limit will be introduced. The uniform amendments applicable to the three regulations, exempting institutions with a Balance Sheet Total of less than HUF 100 billion, will enter into force on 1 October 2024.
Institutions entering the market may have initial issues complying with the financing regulations, and adequacy may be an excessive burden for smaller banks and branches that do not pose systemic risk, which justified the review of the current provisions. With the amendment, the segment with a cumulated market share of 0.3 percent of the sector level Balance Sheet Total is exempted from compliance requirements, which represents negligible risk in terms of financial stability. The main risks of the business model of small institutions concerned are adequately managed by the supervisory requirements and macroprudential regulations regarding capital and liquidity. At the same time, the MNB continues to monitor the development of macroprudential financing indicators through data provision requirements that will keep on being applied to all banks.
The MNB decree is published in the Hungarian Gazette.
More information on the central bank's macroprudential tools for managing liquidity and financing risks can be found here in case of MFAR, and here for tools reducing banks' external vulnerability (FFAR, FECR, IFR).
Magyar Nemzeti Bank