MNB: lending is falling, but the banking system is stable despite the crisis

MNB: lending is falling, but the banking system is stable despite the crisis
MNB: lending is falling, but the banking system is stable despite the crisis

The Hungarian banking system entered the current challenging period with a stable, strong capital position and significant liquidity reserves. The sector’s ability to withstand shocks is adequate, its liquidity and capital position are therefore robust even assuming a crisis situation that is much more severe than the current forecasts – concluded the head of department of the Magyar Nemzeti Bank at the presentation of the report.

“Every semester, we test the domestic banks in every stability report. Even assuming a crisis situation that is even more serious than the current one, it can be said that the majority of the domestic banking sector can withstand this test, both from the point of view of liquidity and the capital situation.” According to Bálint Dancsik, credit risks continued to increase in the turbulent economic environment – especially in portfolios sensitive to energy prices. Due to the rising interest rate environment and the uncertainty caused by the war

the MNB expects a decline in the dynamics of loan expansion in both household and corporate lending.

Corporate lending is still maintained by the Széchenyi Card Program, but household lending has already started to decline in the fall. According to the head of department of the MNB, the decline in the third quarter is clearly visible in 2022: housing loans fell by thirty percent compared to the same quarter of the previous year. If we specifically look at the September data, there is already a decrease of almost forty percent.

According to Bálint Dancsik, among consumer loans, one of the most important products is baby loans, but even here the decline is 27 percent. A decrease was also seen in the case of consumer and other loans, the rate of which was 17 percent.

The ratio of non-performing loans has moved slightly from its historical low. It was 4.2 percent in the residential segment and 3.9 percent in the corporate sector by the end of the semester. In its report, the MNB also calculated how the increase in residential overhead costs could affect the mortgage loans of the Credit Institutions sector.

In ten percent of the loan portfolios, the “maintenance shock” can affect households more significantly. At the same time, the probability of failure of SMEs with domestic loans could also increase from 2.9 to 4.7 percent, according to the central bank’s estimate. This happened as a result of the combined negative effects that can be observed until the fall of 2022 – concluded the head of department of the Magyar Nemzeti Bank.

Portfolio writes that, according to the central bank’s analysis, the new government measures this year are approx

five hundred billion forints are taken from the banks’ coffers,

of these, the interest rate cap represents a burden of 195 billion this year alone. According to the portal, the extra profit tax will reduce income by HUF 226 billion, the interest stop measures by HUF 195 billion, and the increase in the transaction tax by HUF 40 billion.

According to the MNB, the interest rate freeze measure can reduce the repayment burden of the debtors concerned, but it also has a number of harmful consequences: for example, it weakens the monetary transmission, results in direct losses for the banks, has a negative effect on the domestic financial culture and provides unreasonably many advantages to higher-risk, variable-rate borrowers for owners of mortgage loans.

Opening image: Getty Images/Bloomberg

The article is in Hungarian

Tags: MNB lending falling banking system stable crisis

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