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Changes and Updates in Hungarian Banking Sector: Liquidity Stress Test and ICAAP-ILAAP-BMA Manual

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This newsletter from KPMG Hungary discusses recent changes and updates related to the Hungarian banking sector, specifically the liquidity stress test (LST) requirements and the ICAAP-ILAAP-BMA manual.

Overview of Key Updates

The following are the main points of this newsletter:

Liquidity Stress Test (LST)

Complex Risk Management System

  • The LST should be part of a complex risk management system, requiring proper technical support and coordination with other risk management tools.

MNB Amendments to ICAAP Handbook

Expansion of ICAAP-ILAAP-BMA Manual

  • In July 2020, the Hungarian National Bank (MNB) expanded the ICAAP-ILAAP-BMA manual to include prudential management of Funding for Growth Scheme (FGS) and Bond Funding for Growth Scheme (BGS) programs.

Capital Requirement Discount for FGS Go Scheme

Conditions for Aggregate Capital Reduction

  • The MNB introduced a capital requirement discount for loans disbursed under the FGS Go scheme, with conditions that:
    • The aggregate capital requirement reduction must remain below 1% of the total risk exposure amount (TREA) of Pillar 1.
    • The capital requirement discount will be determined for the first time during the 2021 ICAAP review.

Calculation of Capital Advantage

FGS Go Portfolio Disbursed up to Budget Expiration

  • The capital requirement discount will be calculated based on the FGS Go portfolio disbursed up to the date of exhaustion of the budget.

Methodology for Calculating Capital Requirement for BGS Bonds

Credit Risk Capital Requirement Framework

  • The MNB sets the credit risk capital requirement for securities issued under the BGS in the framework of ICAAP supervisions.