MNB ponders quantitative easing, launches 'bad bank'



"It is a question" whether national central banks outside the euro area, including the National Bank of Hungary (MNB), should or should not launch "programs similar to the probably imminent quantitative easing" of the European Central Bank (ECB) for safeguarding competitiveness, managing director of MNB, Márton Nagy, said at a Euromoney conference in Vienna yesterday.

This could be arranged in the framework of a program similar to MNB's Funding for Growth scheme, extended in order to enhance lending, Nagy explained.

Governing Fidesz party chief whip Antal Rogán urged the MNB to increase its Funding for Growth program in an interview in Budapest on Monday.

The managing director of MNB also said that Hungary has not joined the banking union in the EU because it is not a member of the euro zone. "Our biggest challenge now is joining the euro area, and joining the banking union and possibly fiscal union can come after that", Nagy said.

He also said that more banks might land in state hands, after the government last year agreed to buy MKB Bank and Budapest Bank.

"Further bank purchases by the state cannot be ruled out, but currently there are two banks, MKB and Budapest Bank, whose situation needs to be handled by the government and the central bank," Nagy said.

On Monday, minister of National Economy Mihály Varga said in an interview in Budapest that with 50% of the bank sector in Hungarian ownership in terms of total assets, the government's goal has been achieved. This would make any further state acquisitions unjustified, but, with market ratios changing, "the government should not turn down a possible offer if there is a rational reason for the state purchase", Varga said.

The government's determined to keep the banks only temporarily and resell them after restructuring them. A stock exchange floatation could be an option but Varga said he would not rule out other solutions either.

Hungary's central bank will soon launch a bad asset management company, or "bad bank", managing director Márton Nagy also told the Vienna conference yesterday.

Nagy said the asset manager, which will buy up commercial real estate loans from banks on a voluntary basis, will start operating once its internal rules are defined, based on consultations with the bank sector, the EU and the ECB. The managing director emphasized that the bad bank project was not about bank resolution: it is a kind of help that should enhance bank lending, he said.

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