Fitch Warns Against Impact of State Intervention in Banking Sector

Ratings

Fitch Ratings warned that a windfall profit tax, interest rate caps, and a higher transactions duty threshold could "amplify" high uncertainty in the operating environment for Hungarian banks and weigh on creditor confidence in research published on Monday, according to a report by state news wire MTI.

"The most recent state interventions in the Hungarian banking sector appear financially manageable but increase the risk of further policy interventions (including extending current measures)," Fitch said.

Fitch pointed to estimates published recently by the National Bank of Hungary (MNB) showing the local banking sector could absorb an additional regulatory burden of about HUF 500 bln in 2022, including HUF 226 bln from the windfall profit tax, HUF 195 bln from interest rate caps and HUF 40 bln resulting from the increased threshold for the financial transactions duty.

"Increased state interventionism could negatively affect our view of Hungarian banks' operating environment and their performance prospects," Fitch said. 

"Moreover, the record of state intervention has negatively affected our view of the potential extraordinary support available to rated Hungarian banks from their foreign parents," it added.

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