MNB to give banks six-month extension to manage forint mortgages

MNB

Image by Jessica Fejos

Banks will have until April 1, 2017 to improve the requirement set by a June 2015 National Bank of Hungary (MNB) decree to back at least 15% of their net mortgage loans with long-term liabilities, the MNB announced today, according to Hungarian news agency MTI reported.

The Bankʼs Financial Stability Council decided to move the deadline six months ahead from the original deadline of October 1.

In a further amendment, a de minimis rule will be introduced which will exempt financial institutions with less than HUF 3 billion in retail mortgage loan stock – considered non-significant players in the segment – from the requirement.

The amended MNB decree is expected to be published in the official gazette Magyar Közlöny at the beginning of March.


The MNB press release noted that the amendment of mortgage legislation, and the re-introduction of independent mortgage rights is necessary to make Hungarian regulations compatible with EU law and to create a sound mortgage bond market.

Legislative amendments aimed at supporting the financing of the existing loan stock through mortgage bonds is expected to be in place by the spring, the MNB said.

The MNB decided to introduce the 15% Mortgage Loan Financing Adequacy Ratio to mitigate the mismatch in maturities of forint mortgages, which have runs of ten years or more, and the banking sectorʼs forint liabilities, which typically mature within one year. The move could also support a revival of the mortgage-backed bond market and the increase of mortgages with longer interest periods and lesser lending risk, the MNB said.

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