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MNB extends SRB requirement to non-problem FX project loans

The National Bank of Hungary (MNB) on Monday said it will extend a systemic risk buffer (SRB) requirement earlier rolled out to manage risk arising from problem project loans to non-problem FX currency project loans, state news wire MTI reports.

"In addition to problem exposures already covered, project loans qualified as non-problem, but denominated in foreign currency will also be included in the determination of the capital buffer rate," the MNB said.

The new rule will take effect on January 1, 2020.

Initially, non-problem FX commercial real estate project financing loans will be taken into account with a low, 5% weight.

At the same time the SRB is extended, the de minimis limit for the exemption threshold will be raised to HUF 20 billion from HUF 5 billion "to exempt institutions that manage a stock which is non-material from a systemic risk perspective".

The MNB said the measure is a disincentive for the emergence of problem portfolios and that no lending institutions are expected to be required to maintain an SRB as of January 1, 2020.

The MNB first introduced the SRB on January 1, 2017, but announced the rollout more than a year in advance to give lenders time to clean out their problem portfolios.

The central bank and financial market watchdog noted on Monday that systemic risk related to problem exposures had been "substantially decreased" with the support of the existing SRB and favourable market conditions.