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Simor urges end to "vicious cycle" of burdening banks

National Bank of Hungary governor András Simor on Tuesday pressed for an end to the "vicious cycle" of placing state burdens on banks, causing a further decline in lending activity and hurting growth as well as the country's fiscal position.

Banks do not reduce interest margins because of the burdens placed upon them by the state, Simor told the forum organised by Portfolio.hu. Because of this, the ratio of non-performing loans grows, which causes banks' ability to lend to deteriorate further, thus negatively affecting economic growth and the budget, he explained.
Simor said that restarting lending activity in Hungary was a problem of supply rather than demand. Banks' propensity to take risk is low, he added, reiterating a stand taken earlier by the central bank. Banks have no shortage of financing for their lending activities, he said.