Repayment moratorium participation rate continues to fall 

Banking

According to preliminary data, 2% of the corporate loan portfolio, and 5% of household loan portfolio continued to participate in a conditional repayment moratorium in force from November 1, even though significantly more retail and corporate clients were eligible, the National Bank of Hungary (MNB) said on Friday in its Stability report, according to state news wire MTI.

Sales revenue of 31% of the enterprises and companies using the moratorium declined by at least 25pc from 2019 to 2020. These companies, which are eligible for the extended period of the moratorium until July 2022, account for 24% of the loans in moratorium and corresponded to 4% of total loans outstanding. 

In the retail segment, 71% of the debtors availing of the moratorium continue to be eligible for the extended moratorium, which corresponded to roughly 23% of all retail loans outstanding.

 Hungary's government rolled out a blanket repayment moratorium in the spring of 2020 to ease fallout from the coronavirus crisis. From November 1, participation in the moratorium was limited to retail borrowers whose incomes have fallen, the jobless, pensioners, and parents raising children, while corporate borrowers must show a 25% fall in revenue to join.

In general, MNB said the Hungarian banking system is stable, and has considerable capital reserves, rendering it resilient to risks. As only a small proportion of debtors indicated that they were in need of a third phase of the repayment moratorium, this significantly reduced future uncertainty about the impact of the program. 

No major risk can be identified in terms of the sector's lending capacity, and thus a smooth return to market-based lending is ensured. In conjunction with the return of inflation, the rising yield environment results in credit and revaluation risks, but may also improve profitability for the banking sector over the medium term via higher interest margins. 

During the crisis, the banking system performed well, but looking ahead, banks also need to adapt to the challenges of new entrants and continuous technological development.

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