The level of capitalisation of the Hungarian banking system is in line with requirements under a base scenario and requires no additional capital until the end of 2012, an integrated stress test of credit and market risks carried out by the National Bank of Hungary, the bank's Report on Financial Stability showed.
The banking system would require about HUF 80 billion in additional capital under a stress scenario, including the additional provisions necessary to back the existing loan stock according to the stress, Márton Nagy of the NBH told a press conference on Wednesday.
The additional capital need is manageable, Nagy said, based on the commitments of the owners of Hungarian banks and financial businesses. Besides, the HUF 300 billion set aside from Hungary's 2008 IMF-EU credit agreement to support the banking system is still available, he noted.
Credit risks alone would generate an additional capital requirement of HUF 48 billion by the end 2012, the fresh stress showed, little more than the HUF 40 billion under the previous test prepared last November.
A short-term stress test carried out by the NBH based on the performance of Hungary's seven biggest banks in 2010 showed that the financial institutions' liquidity reserves would be adequate even if financial market disturbances, deposit withdrawal and an exchange rate shock occurred simultaneously, although the liquidity buffer available for the seven banks as a percentage of total assets fell from 21-22% to about 18% in early 2010.
The test also showed that, while forint liquidity remained more than sufficient, a shortage of foreign exchange liqudity may arise under stress, Nagy said, noting that the smooth operation of the FX swap market is a prerequisite for the safe operation of the system.
However, the level of liquidity reserves has fallen from the previous year, the report, published on Wednesday, shows.