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Varga: Increased lending could impact bank levy

History

Hungary’s National Economy Minister Mihály Varga believes that banks in Hungary “must consider” the reduction of the extraordinary bank levy by the Hungarian government as “compensation for increased lending”, the minister said in an interview with state-owned Kossuth radio this morning.

Whether this requires legal regulation is still a "up for debate", he added. According to Varga some Hungarian banks have already made concrete commitments to boost their lending activity, while others have been "a little more subdued".

The National Bank of Hungary (MNB) managing director Márton Nagy told Hungarian economic daily Napi Gazdaság today that the scale of the reduction in the bank levy ought to be tailored to each bankʼs increase in lending activity. According to Nagy, banks that perform better than average should be able to participate in the bank levy reduction at an accelerated pace. Corrections within the banking sector need to be forward-looking, not simply retroactive, he added.

Hungary introduced the extraordinary bank levy as a temporary measure for three years in 2010, but it became permanent in 2013 and Varga said earlier it was expected to be maintained, but at a lower rate. The Hungarian government recently announced plans to gradually reduce the bank levy in the coming years. Next year, the levy is set to fall by HUF 60 bln.

On April 23, Hungarian news agency MTI quoted Cabinet Chief János Lázár as saying “Hungary will not legally require banks to increase their lending activity in return for a reduction in the bank levy.” MTI adds that “Lazar noted that the government was committed to reducing the bank levy while also asking banks to boost lending in an agreement signed earlier with the European Bank for Reconstruction and Development.” On April 24, MTI quoted Hungary’s Prime Minister Viktor Orbán saying “that banks had not agreed to be legally bound to boost their lending activity, but had made a promise to do so.”

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