Reimbursement moratorium: the MNB has revealed what it proposes from 2021

In his presentation, Gergely Fábián, Executive Director of the MNB, spoke about the following:

• We are experiencing the biggest economic shock since the Second World War, but the Hungarian banking system has done well in this crisis. Instead of a “V”, you see a cheap bounce in the form of a check mark According to the Bloomberg Economics World Real-Time Recovery Indicator, the second wave is causing a lot of uncertainty.
• In the banking system, shocks to the real economy will appear in full force only with a delay, the current snapshot does not yet show the full impact of the coronavirus. At the same time, the Hungarian economy is more resistant to crises and its fundamentals are stronger than during previous crises.
• The banking system is worth preparing for a crisis, based on its indicators of liquidity, capital adequacy and profitability, it is not a problem, it can support the economy during the crisis. Just one example: the proportion of mortgage loans with a variable interest rate above 80% is now below 50% in the portfolio.
• The repayment moratorium has been of great help to debtors, currently a Between 40 and 50 per cent of the outstanding eligible loan portfolio (more than 50 per cent depending on the number of units) is in default, with the help of which approximately HUF 2 billion of liquidity remains in the hands of homes and businesses.
• In the case of households, in the case of short-term unsecured consumer loans with higher interest rates, and in the case of companies, the proportion of those with default is higher than the average in the case of small and micro enterprises.
• 10-15 percent of clients with moratorium, 160-240 thousand domestic debtors, may be vulnerable to changes in the income situation and the status of the labor market based on the payment difficulties expected without the moratorium.
• In several countries, the payment moratorium had already expired, where there were extensions, which generally allowed only a smaller group to suspend payment.
• According to the MNB, after the expiration of the payment moratorium, a solution is proposed aimed at vulnerable debtors. They consider it important to propose a temporary and incentive solution that is transparent and easy to apply (that minimizes moral hazard). This can be the maintenance of an interest payment obligation or the scheduled repayment of full repayments.
• The situation is more complicated for companies, since They also have obligations to suppliers in excess of HUF 14 billion, which are not covered by the moratorium.. Economic infection is a slower process than biological infection, there are also superinfectives here: if these companies cannot pay their bills, it can spread to the economy.
• Today, viable companies and business models are also in trouble, and the Hungarian legal environment does not support reorganization and companies are often liquidated through bankruptcy proceedings.
• Banks have the ability to grant loans, it is very important that there is the will to do so. In the field of guarantees, which play a key role in business loans, Europe has unfortunately dragged us along, although it is really important in a crisis.
• The FGS Hair contracts are already worth 550 billion HUF.

Gergely Fábián also made a provocative statement:

IT IS NOT NECESSARY FOR THE BANKING SYSTEM TO MAKE A FINANCIAL INTERMEDIATION. THE SECTORIAL ROLE MAY BE DESIRED AND CAPABLE OF BEING ASSUMED BY OTHER ACTORS. The coronavirus may be a milestone for bigteches / finteches.

Four out of five central banks, according to a BIS survey, are seriously considering introducing central bank digital money. According to an IMF survey, there are already 7 pilot projects and 29 exploratory projects for this.

Photo: Ákos Stiller / Portfolio