MNB maintains capital buffer; introduces interbank funding cap

MNB

The National Bank of Hungary (MNB) has left the rate of its countercyclical capital buffer, introduced in 2016 to mitigate the impact of future financial crises, at 0%. The buffer is set at 0-2.5% of total risk-weighted assets each quarter in an MNB decree.   

"The level of cyclical systemic risks is low, and therefore the Financial Stability Board - with a view to supporting lending - has decided to maintain the 0% rate," the central bank said in a statement Wednesday, quoted by state news agency MTI.  "Foreseeably no change is expected over the forthcoming one-year horizon, which may support the sustainable lending activity of credit institutions," it added.  

The MNB acknowledged the lending turnaround on the credit market and "buoyant" residential real estate market activity, but said net credit outflow "cannot be considered excessive."

Also Wednesday, the central bank said it has decided to introduce a 30% cap on interbank funding for lenders from July 1, 2018.

"Based on available data, the [threshold] will not require adjustment for the overwhelming majority of institutions; it will nevertheless act as a barrier to the build-up of excessive reliance on wholesale funding," the MNB said.

The limit, dubbed the Interbank Funding Ratio (IFR), limits funds from financial corporations, weighted according to currency and residual maturity. The ratio considers all funding received from financial corporations, but exceptions and benefits ensure that the requirement does not materially affect normal banking operations.

The MNB noted that it had consulted with the European Central Bank and lenders on the new cap.

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