National Bank of Hungary: Maintaining banks’ strong capital position ‘pivotal

The National Bank of Hungary (NBH) acknowledged a reduction in overheating risks, in spite of the gradual lending recovery, but said maintaining banks’ strong capital position was “pivotal” amid still high geopolitical and macroeconomic uncertainty in a report published on Monday.

National Bank of Hungary shows a reduction in overheating risks

In its fresh Macroprudential Report, the central bank and financial market watchdog said indicators assessed to determine the Countercyclical Capital Buffer rate pointed to a reduction in the risks associated with overheating, but insisted on the need for a build-up of releasable capital buffers in a timely manner.

The NBH noted that the Countercyclical Capital Buffer rate would rise from 0.5pc to 1pc from July 1, 2025, even in a neutral risk environment. It added that the strong capital position and “outstanding profitability” of banks would mute any negative impact on the lending capacity of the banking system.

Lenders continue to comply with macroprudential financing rules with appropriate capital buffers and a favourable funding structure, the NBH said. The ratio of short-term debt on the banking sector’s balance sheet remains low, it added.

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