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Risk Management in Hungarian Banks

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Introduction

The banking sector in Hungary has undergone significant changes since 2008, with stricter regulations and measures to control risks. Two prominent banks, CIB Bank and UniCredit Bank, have implemented various risk management strategies to mitigate operational, credit, market, liquidity, and reputational risks.

Risk Management Strategies

• Operational Risk Management
  • Both banks use the Standardized Approach (STA) for calculating regulatory capital requirements under Basel II.
  • UniCredit has used the Advanced Measurement Approach (AMA) since 2009, which involves internal loss data, external loss data, risk scenarios, and business environment and internal control factors.
  • The Group’s Management Board is responsible for effective oversight of operational risk exposure.

Financial Performance

• Liquidity Positions
  • Both banks have taken measures to improve their liquidity positions.
  • CIB Bank has strengthened its self-funding capacity and decreased its dependency on Intesa Sanpaolo funding.
• Non-Performing Loans (NPLs)
  • UniCredit Bank has a solid capital position, with no need for capital injections in 2014.

Conclusion

The analysis of the annual reports of both banks reveals their commitment to risk management and improving their financial performance. The strengthening of the legal framework in Hungary has contributed to the current stable operation of the banking system.

Key Takeaways

• Effective risk management is crucial for Hungarian banks to mitigate operational, credit, market, liquidity, and reputational risks.
• CIB Bank and UniCredit Bank have demonstrated their commitment to improving financial performance and reducing NPLs.
• The banking sector in Hungary has shown resilience and stability since the introduction of stricter regulations.