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Central Bank: Capital, Liquidity Reserves Make Banking System Resilient to Crisis

MTI-Hungary Today 2022.05.26.

Hungary’s banking system was in a “prepared state” as it faced a sharp increase in risks because of the war in Ukraine, and the sector’s capital and liquidity reserves ensure lenders will be resilient even if the conflict is protracted, the National Bank of Hungary (NBH) said in a report published on Wednesday.

“The banking sector has significant liquidity reserves, which provide strong protection amid elevated risks. According to our stress test, the sector would meet the regulatory liquidity and capital requirements even in the case of a severe stress scenario,” the central bank said in its fresh Financial Stability Report.

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At a press conference presenting the report, department head Bálint Dancsik said commercial banks’ stock of loans to companies most affected by higher energy and commodity prices is around 2,000 billion forints (EUR 5.2bn), or about one-fifth of the entire corporate loan book. Within that credit, loans to the most vulnerable companies, in the chemicals industry and industries that rely on metal feedstock, stands at 620 billion forints, or around 6 percent of lending stock, he added.

Dancsik said the phase-out of the blanket repayment moratorium from November 1 did not result in any “significant” deterioration of portfolio quality, pointing out that the rate of non-performing loans for the corporate loan book rose from around 3.5 percent to 4.2 percent by February.

In the featured photo illustration: Central Bank Governor György Matolcsy. Photo by Szilárd Koszticsák/MTI


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