Hungarian National Bank launches new incentive to encourage SME lending

The Hungarian central bank (MNB) said on Thursday that it would launch a new incentive to encourage local banks' lending to SMEs (small and medium-sized companies). The central bank on Thursday announced an easing of reserve requirements for banks which will lend to SMEs.

According to the new scheme, banks which meet 50%-100% of SME lending commitments (to be agreed upon with the CB), would be allowed 20%-75% reduction in their capital reserve requirement for those loans. If a bank reaches or exceeds 100%, it could be spared all reserve requirement for that loan book.

It appeared that the MNB has lessened its focus on QE measures now that it has re-started its rate cutting. Nevertheless, MNB would maintain loose monetary conditions using a variety of policies. The new scheme will replace MNB's Funding for Growth Scheme.

"The free capital released this way can support a further pickup in market lending, and ensure a better return on equity for the players in the local credit market," the bank said.