MNB delays application of capital buffers for big banks



The Financial Stability Board of the National Bank of Hungary (MNB) has decided to delay the introduction of capital buffer rates on systemically important Hungarian banks, applying the rates only gradually over four years starting from 2017, rather than from January 1, 2017 as announced earlier, the MNB said today, according to Hungarian news agency MTI.

The Financial Stability Board also decided to apply another type of capital buffer, the so-called systemic risk buffer, aimed at reducing risks arising from problematic project loans, only from July 1, 2017, six months later than earlier planned. The MNB said the extension until 2020 of the introduction of extra capital buffer requirements, applying to banks important for the operation of the Hungarian financial system as a whole, will help revive lending while strengthening financial stability.

The MNB may levy additional capital buffers of 0.5%-2% of consolidated risk-weighted assets of banks it has identified as "other systemically important institutions" under EU regulations. Such institutions are identified by the member states, while global systemically important institutions are identified at international level. The MNB said it had identified eight banks in 2016 as "other systemically important institutions" based on consolidated data at the end of 2015.

The current list differs from the previous nine-strong list published in January as it no longer contains FHB Bank, which then still bore the same rate for 2017 as the four banks at the lower end of the current list. The eight banks with capital buffer rates for 2017 and indicative rates for 2018, 2019 and 2020 are OTP Bank, K&H Bank, UniCredit Bank Hungary, Erste Bank Hungary, Raiffeisen Bank, Magyar Takarékszövetkezeti Bank, MKB Bank and CIB Bank.

Banks have made significant steps to clean their assets since the MNB announced the introduction of the systemic risk buffer, the central bank said, explaining the considerations behind the half-year delay. The problematic project loan stock dropped to HUF 310 bln by the end of Q2 2016, down from HUF 820 bln in Q3 2014. In addition, already ongoing sales of such portfolios could take more time.

The MNB said the move will give affected institutions more time to reduce problem portfolios whereby they could be exempted from the buffer itself and be better positioned to lend. The buffers, applying from next July 1, will be based on data at the end of Q1 2017.

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