Economic Development Ministry Responds to Banking Concerns

Banking

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The Ministry of Economic Development issued a statement on its website Friday responding to the Hungarian Banking Association's negative assessment of government measures that would incentivize lenders and households to buy more government securities.

The banking association had argued that extending the windfall profit tax on lenders to 2024 while allowing lower payments in exchange for buying more government securities would reduce banking sector liquidity and cut outlays for corporate investments.

The ministry said the measures aimed to boost demand for government securities and strengthen the financial know-how of citizens. It also pointed to the need for incentives and support to preserve the real value of household savings.

The ministry said the local banking sector's 72% loan-to-deposit ratio was "low" and allowed banks "significant room" to lend further. It added that lenders had over HUF 7 tln in short-term central bank facilities.

The windfall profit tax poses no threat to the banking sector's "strong" capital and liquidity position or its "high-level capacity" to lend, the ministry said.

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