Hungary: Further COVID-19-related developments in the Hungarian banking sector

15 April 2020 | hungary newsletters

One-week deposit tender

On 1 April the MNB announced that it will hold a one-week deposit tender, announced weekly, which will allow for more efficient liquidity management by borrowing at a base rate of 0.9 %. The deposit tenders have begun with the first tender held on 2 April 2020. Pursuant to the announcement of the MNB, issues have emerged, and the uneven distribution of liquidity among banks justifies such a liquidity-absorbing deposit facility. 

Capital buffers

Effective from 1 July 2020, the MNB will lift the capital buffers applicable to domestic systemically important credit institutions due to the extraordinary circumstances caused by the COVID-19 epidemic. The capital release is expected to support the lending activities of the banking sector. The banks concerned will need to gradually build up the capital buffers that the original level required by 2020 over a three-year period starting in 2022.

Debtors opting-out

A moratorium was introduced in Hungary on 18 March in respect of all retail and corporate financings. Retail and corporate debtors who wish to continue servicing their debts, need to notify their banks of such intention. So far nearly 100,000 debtors have opted out of the moratorium. Banks are asking their clients to primarily use their digital platforms, such as apps and websites, if they wish to continue repaying their loans.

Insurance payments are not suspended

According to the MNB, the moratorium is limited to payment obligations under lending and leasing arrangements, i.e. it does not cover credit-related insurance policies. Therefore, the premium for the credit coverage insurance must continue to be paid, otherwise it may lead to the termination of the contract by the insurer. Certain banks will still charge the insurance premiums, while other banks are applying the moratorium to the insurance premium too.