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Hungary corporate sector loan stock falls HUF 400-450bn in 2010

The 1.2% GDP growth was achieved last year without any growth in lending as the stock of corporate loans declined HUF 400-450bn, officials of the National Bank of Hungary said at a press conference on Friday.

While the stock of corporate loans grew 10-20% a year in 2000-2008, the years preceding in the crisis, it has been declining steadily, at 5-10%, since the last quarter of 2008. The stock dropped 5% below its level at the end of 2009 by the end of last year, MNB director Márton Nagy said, presenting a study prepared by the MNB staff.

Earlier, banks' willingness to provide loans was the main obstacle to lending growth, Nagy said, now banks' ability to lend has become a bigger impediment. This is related to the banks' deteriorating capital position.

The narrowing of the supply of bank loans is primarily affecting the SME sector, and translates into stricter conditions of current assets loans, he added.

As it is difficult to encourage banks' willingness to take risks, the state needs to partially take over the risks, the MNB study said.