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MNB to introduce countercyclical capital buffer

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MNB headquarters in Budapest (Image by Jessica Fejos)

The National Bank of Hungary (MNB) yesterday announced its introduction of a countercyclical capital buffer to reduce the impact of future financial crises, Hungarian news agency MTI reported.

(Photo: Jessica Fejos)

"In the future the additional capital requirement prescribed in periods of excessive lending will mitigate excessive credit outflow, while in crisis periods the release of the formerly accumulated capital buffers will support lending, and thereby the recovery of the economy," the MNB said, explaining the move.

The countercyclical capital buffer rate will be set at 0% of total risk-weighted assets from the start of next year, as "no excessive credit growth" can be observed in the Hungarian banking system at present, the MNB said.

The rate, to be between 0% and 2.5%, though higher "in justified cases", will be set each quarter in a central bank decree.

The buffer, to comprise capital components of the highest quality (CET1), must be accumulated by credit institutions and investment firms, though small- and medium-sized investment firms will be exempted from the requirement.

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