The rapidly evolving situation caused by the COVID virus pushes governments to adapt in an ever increasing tempo. Just days after the first banking measures were introduced, additional ones became necessary to prevent further economic disturbance in Hungary.
One-week deposit tender
MNB announced that it will hold a one-week deposit tender every week, which will allow for a more efficient liquidity management by borrowing at a base rate of 0.9%. The deposit tenders have started with the first tender on April 2, 2020. During this tender, eligible banks submitted offers worth of HUF 665 billion. Pursuant to the announcement of the MNB, the issues emerged in the past weeks and the uneven distribution of liquidity among banks justifies such liquidity-absorbing deposit facility.
Capital buffers
Effective from 1 July 2020, the MNB lifts 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 activity of the banking sector. The banks concerned will need to gradually build up the capital buffers the original level required by 2020 over a three-year period starting in 2022.
Debtors opting-out
The moratorium has been introduced in Hungary on 18 March to 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 still charge the insurance premiums, while other banks apply the moratorium also to the insurance premium.
By Gergely Szaloki, Partner, and Marcell Olajos, Associate, Schoenherr
