Hungarian Banking System: Capital Requirements and Contingent Capital Arrangements

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The Hungarian banking system has several key regulations governing capital adequacy requirements and contingent capital arrangements. Although there are no further details about these specific topics in the provided text, additional context and information can be provided to understand the current landscape.

Capital Adequacy Requirements in Hungary

The European Central Bank’s Capital Requirements Regulation (EU) 575/2013 (CRR) is implemented in Hungary through a series of regulations and guidelines issued by the Magyar Nemzeti Bank (MNB). This regulation outlines key capital requirements for banks operating in Hungary.

Minimum Capital Requirements

• A Common Equity Tier 1 (CET1) ratio of at least 4.5%
• A Total Capital requirement (TIER 1 + TIER 2) of at least 8%

Liquidity Requirements

In addition to capital requirements, banks in Hungary must also meet liquidity standards:

• Liquidity Coverage Ratio (LCR): A minimum ratio of liquid assets to total net cash outflows over a 30-day stress period.
• Net Stable Funding Requirement (NSFR): A minimum requirement for stable funding to support the bank’s assets and off-balance sheet commitments.

Contingent Capital Arrangements

While there is no specific mention of contingent capital arrangements in the Hungarian Banking Act or the CRR, banks may be required to have contingency plans in place for managing their capital and liquidity during times of stress. These arrangements can include:

• Contingent Convertible Bonds (CoCos): Instruments that convert into equity under certain conditions.
• Additional Tier 1 Instruments: Capital instruments with loss-absorbing capacity.

Please note that specific requirements may vary depending on the individual bank’s circumstances and the regulatory framework applicable at the time.