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MNB sees no immediate systemic risk to financial system

Financial stress had increased significantly around March with the onset of the pandemic, but the level of stress was below that of the financial crisis in 2008 and by now it has subsided back to pre-March levels, officials of the National Bank of Hungary said, according to a report by state news wire MTI.

Image by Jessica Fejos

The coronavirus pandemic has clearly increased risks to financial stability and risks at individual institutions, impacting lending practices as well, but as fears eased in the real economy, this also lowered stress levels in financial markets and it can be said that there are now no significant systemic risks.

MNB officials noted that the situation in 2020 has been more favorable than in 2008 as in the past years significant systemic risks have not appeared, as opposed to the situation before 2008.

Data show retail loan disbursements have slowed both because of demand and supply reasons but state-supported lending schemes have helped counterbalance the drop. By July 2020 retail loan disbursement growth has dropped to 34% but without government-backed loans growth would have been around a negative 5%.

A loan repayment moratorium introduced by the government has impacted around 44% of corporate loans at 60,000 companies and 54% of retail loans at 1.6 mln households.

In June repayments were halted for more than 50% of loans provided to micro-companies and the rate was around 35% for major companies. In the retail segment payments were suspended for some 70% of personal loans and 65% of pre-natal baby support loans.

MNB found that even in the current pandemic situation banks have adequate and stable puffer rates. External debt exposure remains low and the liquidity of banks has actually improved because of steps taken by the MNB and most of them still pass the net stable funding ratio (NSFR) criteria that will come into force in 2021.