The Hungarian banking system is stable, well capitalized, and it follows prudential regulations, but it cannot free itself from the influence of global financial markets: for this reason the government will do everything in the interest of maintaining stability on the financial market, Finance Minister János Veres said on Friday.
Veres was speaking after liquidity on the government securities market dried up, the forint weakened sharply, share prices plummeted and investors speculated about the health of the country’s biggest commercial bank OTP Bank. The government is following the events on the financial market continuously, Veres said. Veres said the government had offered to guarantee OTP Bank’s interbank loans, but the bank turned down the offer. OTP Bank CEO Sándor Csányi said the bank did not need the guarantee.
The government will change some accounting rules that have been a detriment to a liquid government securities market, Veres said. The government will scrap the 40%-of-portfolio limit on pension funds’ holdings of government securities from Monday, he added. Asked whether a temporary suspension of the Budapest Stock Exchange is planned, Veres said the bourse is an independent institution and its heads will decide how to react to the changes. Because of the current situation, the government is in continuous contact with BSE leaders. “It is our mutual responsibility that coordinated steps take place,” he said.
MNB TO TAKE STEPS TO
The National Bank of Hungary will continue, as before, to offer an unlimited amount of liquidity to the country’s banking system, central bank governor András Simor said. The bank does not plan to intervene on the government securities market, he added.
The MNB will take steps to boost liquidity on the market, Simor said. The MNB believes it would do banks the most good if the partner limit -- the limit on interbank borrowing -- is scrapped.
The bank will introduce a daily EUR/HUF swap tender from Monday. The aim of the tender is to see that the redistribution of short-term liquidity between banks be continuous and balanced. The MNB will inform its partners of the details of the tender on Friday. The MNB will only organize the tender, Simor said.
There is no fundamental reason for the weakening of the forint, Simor said. The MNB is closely watching market developments and the forint’s rate. If it deems it necessary, the bank will use the tools at its disposal. The main tool of the bank is interest rates, he added.
Asked whether the bank plans an extraordinary rate meeting, Simor said “in an extraordinary situation, one neither takes nor promises anything.” The stability of the Hungarian economy has strengthened significantly in the past period, and its signs of vulnerability have improved, Simor said. The budget deficit and the current account deficit have improved, as has the country’s external financing requirement. (MTI-Econews)