Economy
Hungary central bank launches funding for growth scheme
Hungary central bank publishes details on funding for growth scheme - 12:01
The National Bank of Hungary (NBH) has on Thursday announced the launch of a Funding for Growth Scheme (FGS).
Click here for more.What about the forint exchange rate? - 11:44
Responding to a question Matolcsy underlined that “the NBH has no exchanger rate target, only inflation target", adding that in view of the crisis in Cyprus “ it is very good that the NBH has no exchange rate target."
He stressed that the MPC has not discussed no proposal whatsoever related to the forint exchange rage, adding that without a specific exchange rate target there is no reference point where the bank should intervene.
“Foreign currency reserves are a great treasure, and burning them up via interventions is generally ill-advised," he said. But with no specific exchange rate target the central bank is not obliged to do so.
Rate-setter Andrea Bártfai-Mager added that NBH intervention could be possible if the exchange rate was permanently different from what fundamentals would justify. The targeted reduction in the bank’s two-week bonds is possible while lowering the country’s vulnerability and therefore it could shore up the forint too.
Possible effects of the three-pillar programme - 11:41
Responding to a reporter’s question Deputy Governor Ádám Balog said that if all of the funds in the programme announced today led to credit growth then - according to the rule of thumb - GDP could increase by up to 0.7 percentage point during the scheme, but if FX debt replacement will dominate there may also be some added growth since the (interest) costs of companies will drop. Bártfai-Mager added that via these programmes credit can find its way to such SME sectors where there would be demand but there is no credit supply therefore this could also help boost growth.
Funding for Growth Scheme announced - 11:15
NBH Governor György Matolcsy told a press conference today that HUF 250 billion worth of refinancing loans will be provided to small and medium-sized enterprises via the banking system for investments and co-financing EU projects.
Further funding will be provided for banks at 0% interest rate in scope of the programme, he added.
Under the FGS, local banks can provide loans at 2% interest, Matolcsy also said, adding that the programme will run between June and August this year. The central bank can decide at the end of the programme whether to continue it or not, he added.
Regarding the size of the programme Matolcsy noted that this will create a substantial excess credit supply since it equals 4% of corporate loans and 7% of loans to micro businesses.
The HUF 250 bn programme could reach about 30% of the FX loans of SMEs, Matolcsy said.
Responding to a question he said SMEs may have access to cheap forint loans and also take part in the pillar aimed to converting FX debt to forint.
“Foreign currency loan is our enemy. We will do everything to reduce this stock," Matolcsy said. The programme aimed at credit extension is built on the British ‘funding for lending’ scheme, he added. Matolcsy also said foreign currency reserves will decrease by EUR 3 bn as a result of the programme.
The second pillar of the scheme is aimed at converting SMEs foreign currency debt (54% of the total debt of some 15,000 companies) to cheap forint debt. This means credit extended at a 2% interest, i.e. a 0% refinancing loan for the companies with a maximum 2% margin allowed for the banks.
Thirdly, the bank aims to reduce the vulnerability of the banking system. It wants to achieve this by lowering the short-term external debt, while observing the Guidotti-Greenspan rule.
The MPC has decided to cut the two-week NBH bond deposit to HUF 3,600 billion from HUF 4,500 bn. For this reduction the central bank is offering foreign currency swap from its own FX reserves.
There are foreseeable benefits and risks attached to the three steps, but every risk is within range of tolerance, Matolcsy said.
The National Bank of Hungary (NBH) has on Thursday announced the launch of a Funding for Growth Scheme (FGS).
Click here for more.What about the forint exchange rate? - 11:44
Responding to a question Matolcsy underlined that “the NBH has no exchanger rate target, only inflation target", adding that in view of the crisis in Cyprus “ it is very good that the NBH has no exchange rate target."
He stressed that the MPC has not discussed no proposal whatsoever related to the forint exchange rage, adding that without a specific exchange rate target there is no reference point where the bank should intervene.
“Foreign currency reserves are a great treasure, and burning them up via interventions is generally ill-advised," he said. But with no specific exchange rate target the central bank is not obliged to do so.
Rate-setter Andrea Bártfai-Mager added that NBH intervention could be possible if the exchange rate was permanently different from what fundamentals would justify. The targeted reduction in the bank’s two-week bonds is possible while lowering the country’s vulnerability and therefore it could shore up the forint too.
Possible effects of the three-pillar programme - 11:41
Responding to a reporter’s question Deputy Governor Ádám Balog said that if all of the funds in the programme announced today led to credit growth then - according to the rule of thumb - GDP could increase by up to 0.7 percentage point during the scheme, but if FX debt replacement will dominate there may also be some added growth since the (interest) costs of companies will drop. Bártfai-Mager added that via these programmes credit can find its way to such SME sectors where there would be demand but there is no credit supply therefore this could also help boost growth.
Funding for Growth Scheme announced - 11:15
NBH Governor György Matolcsy told a press conference today that HUF 250 billion worth of refinancing loans will be provided to small and medium-sized enterprises via the banking system for investments and co-financing EU projects.
Further funding will be provided for banks at 0% interest rate in scope of the programme, he added.
Under the FGS, local banks can provide loans at 2% interest, Matolcsy also said, adding that the programme will run between June and August this year. The central bank can decide at the end of the programme whether to continue it or not, he added.
Regarding the size of the programme Matolcsy noted that this will create a substantial excess credit supply since it equals 4% of corporate loans and 7% of loans to micro businesses.
The HUF 250 bn programme could reach about 30% of the FX loans of SMEs, Matolcsy said.
Responding to a question he said SMEs may have access to cheap forint loans and also take part in the pillar aimed to converting FX debt to forint.
“Foreign currency loan is our enemy. We will do everything to reduce this stock," Matolcsy said. The programme aimed at credit extension is built on the British ‘funding for lending’ scheme, he added. Matolcsy also said foreign currency reserves will decrease by EUR 3 bn as a result of the programme.
The second pillar of the scheme is aimed at converting SMEs foreign currency debt (54% of the total debt of some 15,000 companies) to cheap forint debt. This means credit extended at a 2% interest, i.e. a 0% refinancing loan for the companies with a maximum 2% margin allowed for the banks.
Thirdly, the bank aims to reduce the vulnerability of the banking system. It wants to achieve this by lowering the short-term external debt, while observing the Guidotti-Greenspan rule.
The MPC has decided to cut the two-week NBH bond deposit to HUF 3,600 billion from HUF 4,500 bn. For this reduction the central bank is offering foreign currency swap from its own FX reserves.
There are foreseeable benefits and risks attached to the three steps, but every risk is within range of tolerance, Matolcsy said.
