Hungary Introduces New Regulations for Financial Institutions

Enhanced Prudential Regulation in Line with EU Directives

BUDAPEST, HUNGARY - In an effort to bolster its financial sector and ensure compliance with European Union directives, the Hungarian government has introduced new regulations for financial institutions.

Key Areas of Focus

• Model Approval: The regulation sets out specific requirements for model approval, ensuring that financial institutions have robust risk management systems in place.
• Specialized Lending Exposures: Institutions will be required to meet stringent standards for lending to high-risk borrowers, reducing the likelihood of default and associated losses.
• Credit Risk Mitigation: Financial institutions must implement effective credit risk mitigation strategies to minimize potential losses.
• Specific Disclosure Requirements: Enhanced disclosure requirements aim to increase transparency, providing investors with a clearer understanding of an institution’s financial situation.

Regulatory Framework

The Hungarian Financial Supervisory Authority (Pénzügyi Szervezetek Állami Felügyelete - PSZÁF) will oversee the implementation of these regulations and ensure that all credit institutions are in compliance.

Qualifying Holdings in Credit Institutions

• Specific conditions must be met before an investor can acquire a significant stake in a Hungarian bank.
• Regulatory requirements aim to prevent concentration of ownership and promote healthy competition in the financial sector.

Enhanced Transparency through Reporting

Financial institutions will be required to submit regular reports to the PSZÁF on their financial situation and risk exposure. This increased transparency is expected to enhance investor confidence and improve market stability.

The implementation of these new regulations represents a crucial step towards strengthening Hungary’s financial sector and ensuring its alignment with European Union standards.