MNB allots HUF 13.6 bln of IRS linked to lending at tender


Image by Jessica Fejos

The National Bank of Hungary (MNB) allotted HUF 13.6 bln of a new three-year interest rate swap instrument, to banks who agreed to increase lending in exchange for the purchase at a tender yesterday, Hungarian news agency MTI reported.

The tender brought total allotment from the four such tenders held so far to HUF 772.4 bln. Through their accepted bids, banks undertook to raise their lending stock to small and medium-size companies (SME) by a combined HUF 193.1 bln a year.

Banks that avail of the interest rate swap (IRS) instruments in these tenders must raise their SME lending stock, excluding non-performing loans, by at least one-fourth of the IRS allocated volume annually.

The MNB accepted all bids, similar to the previous three tenders. Its offer for the swaps was unchanged at HUF 100 bln. 

The MNB announced the launch of the tenders last November. At the time, the MNB said it would allocate HUF 1 trillion of these conditional IRS instruments.

Demand and allotment for the conditional swaps has fallen gradually, from HUF 618 bln at the first tender late in January to HUF 109.7 bln at the second one early in February and to HUF 31.1 bln at the third tender.

The MNB said earlier it will continue to hold the tenders bi-weekly, in line with its earlier commitment, at least to the end of March. 

The tender clients pay a fixed interest rate to the MNB while the MNB pays them a floating rate pegged to the six-month BUBOR in six-month interest periods, with net settlement. 

The average fixed interest rate payable by clients was 0.07% yesterday. The average rate was down from 0.13% at the January 28 tender, 0.23% at the February 11 one and 0.11% at the third tender on February 25. The floating rate payable by the MNB for the first interest rate period which starts on March 16 is 1.308261%, also down from 1.34%-1.35% at the previous tenders.


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