MNB changes terms of loan facility to encourage corporate lending

The criteria for counterparties on the amount of corporate loans and the sanctions applicable in case of non-fulfillment will be eased and a new limit system will be introduced from October 2, the MNB said.
From October the amount of corporate refinancing loans -- which play an increasingly important role in the economy, the MNB noted -- will be taken into account, while the amount of commercial real estate loans, which represent risks to growth and financial stability, will not. Banks will be able to use the facility on the condition that they promise to maintain corporate lending at levels on June 30, 2012 levels, instead of those at the end of 2011.
An upper limit on the initial availability of the facility will be set at 50% of the adjusted corporate loan stock outstanding as of June 30, 2012; however, at individual bank level the size of collateralised loans available will be raised by the amount of the increase in the adjusted corporate loan stock.
The MNB introduced the two-year collateralised loan tender in March 2012 with the aim of providing long-term funding to credit institutions without a term premium. The facility is intended both to help banks to strengthen their balance sheets and to provide a safety net to preserve the capacity to lend in the event of a liquidity shock.
The MNB noted that the stock of lending by Hungarian banks to the corporate sector fell by some HUF 211bn in the first half of 2012, reflecting the unfavourable macroeconomic environment.