Hungary sees no immediate systemic risk to financial system

Although financial stress had increased significantly around March with the onset of the pandemic, the level of stress was below that of the financial crisis in 2008 and by now it has subsided back to pre-March levels, officials of the National Bank of Hungary said.

The coronavirus pandemic has clearly increased risks to financial stability and risks at individual institutions, impacting lending practices as well, but as fears eased in the real economy, this also lowered stress levels in financial markets and it can be said that there are now no significant systemic risks, according to a report by state news wire MTI.

MNB officials noted that the situation in 2020 has been more favourable than in 2008 as in the past years significant systemic risks have not appeared, as opposed to the situation before 2008.

Data showed that retail loan disbursements have slowed both because of demand and supply reasons but state-supported lending schemes have helped counterbalance the drop. By July 2020 retail loan disbursement growth has dropped to 34% but without government-backed loans growth would have been around a negative 5%.

MNB found that even in the current pandemic situation, external debt exposure remains low and the liquidity of banks has actually improved because of steps taken by the MNB and most of them still pass the net stable funding ratio (NSFR) criteria that will come into force in 2021.