MNB launches Funding for Growth Scheme spin-off

MNB

The National Bank of Hungary (MNB) today announced a spin-off of its Funding for Growth Scheme (FGS), with HUF 500 billion set aside to finance new loans for SMEs that are of "average credit risk". The scheme, dubbed "FGS+", will launch on March 16 and run until December 2015.

The FGS+ is separate from the FGS, but runs parallel with it and is similar in several ways, the MNB said.

With the FGS+ the MNB "will improve access to credit for small- and medium-sized enterprises that have not been able to participate in FGS so far", it added.

Unlike the FGS, the MNB will assume SME credit risk under the FGS+ of 50% of each transaction up to 2.5% of the lender's FGS+ portfolio over five years. However, as in the FGS, the refinancing rate is 0% and interest margin charged by banks that tap the credit is capped at 2.5%.

Allocation of the funding under the FGS+ will be based on activity in the second phase of the FGS.

In the FGS, allocation is made on a first come first served basis.

"As part of the monetary policy toolkit, through FGS and the FGS+ running simultaneously, the operation of the entire SME credit market may recover and the efficiency of monetary policy transmission may improve significantly," the MNB said.

From the beginning of 2016, after the FGS and FGS+ wind up, SME lending "can gradually return to restored market-based conditions", the MNB said.

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