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MNB requires mortgage lenders to hold more long-term liabilities

The MNBʼs 15% Mortgage Funding Adequacy Ratio (MFAR), requiring lenders to back at least 15% of their net mortgage loans with long-term liabilities, will be raised to 20% from October 1, 2018, the National Bank of Hungary (MNB) said today, according to Hungarian news agency MTI.

In 2015, the MNB introduced plans for the MFAR 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 MFAR will take effect on April 1, 2017, with an initial rate of 15%, and since the future requirement was announced, three new mortgage banks have been established and new mortgage bond issues have taken place in the autumn, the MNB said.

Uptake in mortgage lending and the establishment of a refinancing structure has now made it necessary to tighten MFAR rules, the central bank added.

The MNB is also stipulating that the maturity of the long-term liabilities used for calculating MFAR will rise from 1 year to 2 years. Some liabilities will be taken into account using their net pricing, and mortgage issues by building societies can be classified as stable funding sources.

The MNB calculates that in the next 18 months new mortgage lending could reach around HUF 600 billion.

The MNB decree on the new rules is expected to be published in the official gazette Magyar Közlöny later in December.