There has been no outflow of capital from the Hungarian banking system since October, rather there was an inflow of capital, Central Bank (MNB) governor András Simor said.
In the framework of its six-month swap facility, the MNB has reached agreements with seven commercial banks on keeping their corporate lending stock at least at last year's levels, Simor said. Part of the agreement ensures the banks' clients in Hungary a combined € 2.8 billion of resources.
The primary aim of the central bank right now is not to clamp down on inflation - CPI is already near “price stability” - but maintaining the operation of the country's financial infrastructure and the continuation of capital flows, Simor said.
The MNB supplied some HUF 2,000 billion in extra liquidity in the past months by reducing reserves, expanding coverage banks may use and ensuring lending opportunities, he said. The MNB has successfully countered narrowing forex liquidity with its three- and six-month HUF/EUR swap facilities, he added.
The reduction in lending in Hungary is not a result of narrowing capital flows, but happened because banks have become more keen to avoid risk and reduced their leverage, he said.
Corporate lending stock dropped more than HUF 100 billion in Q4.
Simor noted that the forint was not the only currency in the region weakening. The Polish zloty weakened even more against the euro since October than the forint. The problem is that the forint weakened even as interest rates were at a much higher level than in neighboring countries, he added.
Net foreign liabilities of the state, businesses and financial institutions rose to almost 50% in Q3 2008 from just 15% in 2002, Simor said. The level of debt is not the problem, but the pace at which it is growing, he added. (MTI – Econews)