PSZAF proposes higher regulatory capital requirement for lenders

Hungarian financial market regulator PSZAF has sent a proposal to the economy minister that would raise the regulatory capital requirement for lenders, PSZAF chairman Karoly Szasz told MTI.

Hungary’s financial system is stable and secure, but it has reached its load-bearing limit and more cracks are beginning to show, Mr Szasz said. All in all, there is no cause for concern, but the effect of the financial and economic crisis as well as of domestic measures affecting the country’s system of financial intermediaries can now be seen, he added.

Hungary’s 8% regulatory capital requirement is just a hair over that in Slovakia, but under the requirements in other countries in the region, he said. The regulatory capital requirement is 12% in Bulgaria and Serbia and 10% in Romania and Croatia, he added.

Hungary’s regulatory capital requirement ought to be raised as soon as possible, Mr Szasz said, noting that Austria had recently taken steps to strengthen the security and resistance of the country’s banking system to prevent a downgrade of its sovereign rating. Other European Union countries have done the same, he added.

 Strengthening Hungarian banks’ capital positions can reduce, to a large degree, the chance of another downgrade, Mr Szasz said. It would also be assessed positively by the IMF, he added.

"I’m convinced we have to take similar steps [to Austria’s] in this situation. We cannot wait for another possible downgrade or for the IMF to make requests of us. Just the opposite, we have to be proactive and take these steps within our own regulatory scope," he said.

PSZAF’ proposal to raise the regulatory capital was discussed earlier by the Financial Stability Council and submitted in codified form to the economy minister last Friday. PSZAF wants the regulatory capital requirement to reach the 9% European Banking Association benchmark.

Mr Szasz said he expected banks to accept the proposal which is in line with international practices. PSZAF will not allow the new regulatory capital requirement to affect a reduction in lending activity or result in a restructuring of risky assets, he added.