MNB announced a new program to boost bank lending to SMEs

HUNGARY - In Brief 03 Nov 2015 by Istvan Racz
Just as expected, the MNB announced today a variety of new policies, with a view to boosting cheap bank lending to SMEs from January 2016. The program, called Growth Supporting Program (GSP) includes HUF 600n (1.7% of GDP) in new, zero-interest refinancing loans to banks, half in HUF, half denominated in foreign currencies in 2016. This is a pretty big amount, considering that under the running FGS program, HUF1000bn in gross terms was lent out over 27 months. The MNB will offer CIRS swaps to supplement the FCY loans, taking over market risks from banks. In addition, banks that are actively raising their loan stock vis-a-vis SMEs, will be offered HIRS swap, through which the MNB will take over interest rate risk from them, at below-market pricing. These banks will have access to interest bearing deposits over and above compulsory reserves, on which the MNB will pay its base rate even if the deposits are placed for overnight. This may be very popular when the MNB cuts the compulsory reserve ratio to 2% from 2-5% on December 1, as announced. To get access to 100 unit of HIRS and 50 unit of interest-bearing deposits, banks will have to undertake to raise their credit claims on SMEs by 25 units over one-year, as a general rule. In addition, these 'SME-active' banks will be able to reduce their capital requirements on SME-lending, and enjoy the benefits of a newly developed enterprise credit information system. The overall size of the HIRS facility will be HUF1000bn, that of the new deposit facility HUF500bn, and to get access to those, banks are expected to undertake a total HUF250bn increase in their credit stock vis-a-vis SMEs. The MNB expects this program to help raise ...

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