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Central Bank proposes financial package for banks

The Hungarian Central Bank (MNB) has proposed that a Ft 600 billion financial package be made available to Hungarian banks as part of an agreement with the International Monetary Fund (IMF) on a €20 billion support package for the country, central bank governor András Simor said at a press conference with Finance Minister János Veres on Thursday.

Ft 300 billion of the package for the banks would be used to improve their capital position and Ft 300 billion would be used as a guarantee fund, Simor said. The money to boost banks' capital would be available until January 31, 2009, and the guarantee fund could be used until the end of 2009. If banks do not call down the entire amount intended to boost capital, the amount left over could be put into the guarantee fund, he added.

The size of the amount to boost capital was decided with the aim of raising bank's capital adequacy ratios to 14%, Simor said.

The guarantee fund would be established with the aim of allowing banks to refinance their lending resources at lower cost. Banks whose capital adequacy ratios need strengthening may participate in the program.

The state will acquire - at market prices and only temporarily - non-voting dividend preference shares in banks that raise their capital from the Ft 300 billion, Simor said.

The package is necessary so Hungarian banks are not put at a competitive disadvantage compared with their European peers, Simor said. The government will submit a bill on the package by November 10 and request an accelerated procedure in order to speed up its approval.

Veres said an agreement with the EU on its share of the €20 billion financial support package could be signed next week. Talks are ongoing with the IMF and World Bank, the third party participating in the package, he added. (MTI – Econews)