MNB Justifies 'Close Monitoring' of Lending Portfolio Quality

MNB

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The quality of Hungarian banks' lending portfolio requires no macroprudential intervention at present, but "close monitoring is justified", the National Bank of Hungary (MNB) said in a report released on Tuesday, news agency MTI writes.

The central bank and financial market regulator noted that lenders' non-performing loan (NPL) ratio rose "to a small degree" after a blanket repayment moratorium wound up in the autumn of 2021, but was still under 5%. It added that the increase in the NPL rate was driven by delinquency under 90 days past due.

MNB said systemic risk posed by NPLs "could rise in the near future", pointing to the impact of the war in Ukraine, sanctions, the inflation environment, and cost shocks for both businesses and households. It also raised the issue of borrowers' solvency after a limited repayment moratorium winds up at the end of the year and a mortgage rate freeze ends in the summer of 2023.

The report shows some HUF 320 billion of corporate credit and HUF 120 bln of retail loans are in the restricted repayment moratorium ending in December, accounting for around 3% of the corporate portfolio and 1.5% of the retail loan book.

Over HUF 1.4 trillion of credit is impacted by the mortgage rate freeze, MNB said. The average monthly installment on those loans is HUF 53,000, but would climb to HUF 85,000 if the freeze is phased out, he added.

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