MNB tightens collateral rules

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The National Bank of Hungary (MNB) said today that it has slightly tightened its rules concerning accepted collateral for loans by increasing the role of liquid government securities with fixed interest rates compared to other securities, Hungarian news agency MTI reported.

According to regulations, MNB can only offer secured loans to its clients. When asking for collateral, MNB applies “haircut measures” of the value of collateral. After a review of market conditions and foreign central bank practices, MNB decided to give more preference for government securities, according to the report.

The changes will result in an improvement of MNBʼs risk profile while not affecting the value of available collateral assets substantially.

Modifications will enter into effect on March 31, to give banks time to prepare for the changes.

In addition to these changes, the central bank will publish new rules in 2016 concerning the acceptance of mortgage notes as collateral to reduce the risk caused by the overuse of such notes. This could result in additional “haircut measures” for mortgage notes from 2017.

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