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Lending risks could increase in long term

Although the lending portfolios of Hungarian banks have maintained their level of quality in recent years, lending risks could increase in the long term, head of financial market regulator PSzÁF István Farkas told a conference on Monday.

Farkas noted that Hungary's banking system has maintained a capital adequacy ratio of over 10% for the last six years, well over the minimum 8% stipulated in the Basel Capital Accord. He added that the sector now offers all of the products that banks in more developed countries offer. Still, Hungarian banks' total assets are equivalent to just 50% of GDP compared to more than 100% of GDP in more developed EU countries. PSzÁF's senior economist Isván Rácz said interest rates would rise in the coming months, along with the central bank's base rate. He added that there would be pressure on the bank to lower rates once the effects of budget consolidation start to be seen. According to figures of the National Bank of Hungary (MNB) the total assets of credit institutions stood at Ft 19,796 billion at the end of 2005, reaching 90% of the 2005 GDP. (Mti-Eco)