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MNB vice-president says bank to recommend introduction of portfolio-cleansing quota

National Bank of Hungary (MNB) Vice President Júlia Király said at a conference on Wednesday that the MNB advocates the introduction of a portfolio-cleansing quota in order to reduce both strain on Hungary's housing market and prevent a rise in social tension.

Király said that lifting the government moratorium on evictions of those who fail to repay their mortgages would decrease longer-term macroprudential dangers, though not without risk as a result of the accumulated stock of non-performing loans The MNB vice-president added, however, that these risks are manageable.

Király said that the MNB’s regulatory proposals, such as introduction of a transparent credit-interest formula, an obligatory positive debtor list and the preventing the abbreviation of bank resources, would decrease risks and contribute to economic growth based on a stable financial-intermediary system

The MNB vice-president said that the banking sector's profitability has deteriorated significantly, which will weaken the liquidity of banks over the long term. Király said that the increase in risk on the banking sector stemmed primarily from the rising uncertainty of the business outlook.

Király remarked that the government's announced budgetary-restructuring program has led to decrease in risks, cautioning, however, that the extremely high extraordinary bank tax and the eviction moratorium implemented in the name of short-term budgetary stability have raised the macroprudential risks and increased the fragility of Hungary's economic growth.