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MNB Increases Countercyclical Capital Buffer Rate to 0.5%

MNB

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The National Bank of Hungary (MNB) announced late on Tuesday that it will maintain a 0.5pc Countercyclical Capital Buffer (CCyB) rate effective from July 1, 2024 for domestic exposures and will set the applicable rate at 1% from July 1, 2025.

MNB said that due to the still high geopolitical and macroeconomic uncertainty, in line with the practice of European countries and the recommendation of international institutions, the Financial Stability Board has decided to increase the countercyclical capital buffer, state news wire MTI reports.

The notable profitability of banks and their strong capital position enable the application of the countercyclical capital buffer in a so-called positive neutral manner, that is, in periods preceding overheatedness. 

Considering the prescription of a 1% buffer rate, according to the central bank's expectations, banks will still have approximately HUF 1.9 trillion free capital on the sector level, the entire use of which may enable the placement of up to HUF 24 tln in loans. Based on this the bank's ability to withstand shocks can be strengthened without negative lending effects by increasing the capital buffer requirement.

During the rate review in June 2022, MNB decided to increase the CCyB rate applicable to domestic exposures to 0.5% for the first time since 2016. During the rate review in June 2023, in view of the easing of cyclical systemic risks and those associated with housing market overvaluation, MNB postponed the activation by one year to July 1, 2024.

The Financial Stability Board of MNB makes quarterly decisions on the applicable CCyB rate.

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