MNB 'Firmly Rejects' Lenders' Protests Over Reserves Interest

MNB

Photo by Jessica Fejos

The National Bank of Hungary (MNB) "firmly rejected" protests by the Hungarian Banking Association over changes to the rates the central bank pays on lenders' reserves in a statement issued Friday.

On Thursday, the association called for the rollback of a central bank measure that would pay lenders interest on 75% of a higher reserve requirement from April 1, adding that the step would add over HUF 100 billion to lenders' "losses" from the windfall profit tax, rate freezes on mortgage loans and SME credit and a repayment moratorium on farm loans.

Responding to the association, MNB said the measure was "carefully weighed from all relevant perspectives of financial stability in addition to monetary policy goals", adding that the banking sector's financing structure is "stable and balanced". 

It noted that local banks have "ample coverage" to maintain their lending activity and pointed out that the sector showed "outstanding profitability" in comparison to their European peers last year. After the measures affecting reserves come into force, banks will still have "several thousand billion forints" of liquidity, a "multiple" of the amount necessary to meet lending demand, it added.

MNB said "close cooperation" between the central bank, the government, and local banks, of the kind seen during the coronavirus pandemic, is necessary to "slow inflation and again reach price stability indispensable for [Hungary's] economic convergence".

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