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MNB: Banks undertake to raise SME lending by HUF 195 bln

MNB

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Banks are in the process of raising their lending stock to small and medium-sized companies (SMEs) by HUF 195 billion annually from this year, for the next three years, following their successful bids in five tenders of interest-rate swaps (LIRS), the National Bank of Hungary (MNB) said yesterday.

The tender brought total allotment at five such tenders held between January 28 and March 24 to HUF 779.56 bln. The MNB accepted all bids at the tenders where a total of 17 banks participated. 

Banks that availed of the LIRSs in these tenders must raise their SME lending stock, excluding non-performing loans, by at least one-fourth of the allocated swap volume annually. 

The HUF 195 bln new SME credit commitment amounts to a 5% growth of SME lending stock, the MNB said. 

SME lending could increase by 5-10% this year, including outlays in the last phase of the MNBʼs outgoing Funding for Growth Scheme and lending of banks which were not participating at the LIRS tenders, the MNB said. 

Individual commitments of the participating banks varied between 3-34%, and the five banks signing the largest LIRS deals undertook to raise their SME lending by HUF 125 bln a year. 

Demand and allotment for the conditional swaps has fallen gradually, with the bulk – HUF 618 bln – allotted at the first tender. 

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 MNB announced the January launch of the LIRS tenders as part of a package of incentives for active lenders, dubbed the Market-Based Lending Scheme (MLS), last November. The MLS package of incentives comprised LIRS, complemented by a preferential deposit, as well as incentives affecting banksʼ capital reserve requirements and access to a corporate credit information system the central bank is working to set up. 

At the time, the MNB said it would allocate HUF 1 trillion of the LIRSs and will hold the tenders bi-weekly, at least until the end of March. 

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