Számozatlan képlet az 5.3. alfejezetben:
𝐷𝐷𝐷𝐷#= 𝐷𝐷#∙ 𝑖𝑖#
1 − 1 + 𝑖𝑖# +,- ,
where DSt is the debt servicing rate in the period t, Dt is the outstanding debt, it denotes the average annual interest rate and st stands for the average annual residual maturity of the outstanding debt.
Figure 8
Impact of regulation on banks’ short-term external debt and FX loans, with a 2003 introduction
2.5 EUR Billions EUR Billions 15
2006 2007
Reduction of short-term external debt of banks because of regulations
Short-term external debt of banks with regulations (right-hand scale)
Short-term external debt of banks without regulations (right-hand scale)
Reduction of FX loans because of regulations FX loans with regulations (right-hand scale) FX loans without regulations (right-hand scale) 0
Note: The crowded-out holdings for the years show the amount of holdings that would have had to be adjusted in the given year if the instruments had been introduced in 2003. While the reduction in short-term external debt is true for both scenarios, FX loan holdings would only have shrunk in the second case.
Source: MNB.
Large and growing surplus costs would have been incurred by banks mainly because of the potentially lost loans, and by households because of the large spread on forint loans, depending on the size of the FX loan holdings to be reduced and the assumed extent by which forint conversion can be performed (Figure 9).
Although the calculation above is admittedly a mere approximation, it has to be noted that these costs would probably have been much lower than the losses realised by households and the banking system in connection with the undertaken exchange rate risk and credit risk, related to the unsustainable banking model, as well as the spillover costs for the national economy, which are well-known to have been high. In the case of the Swiss franc-denominated loans, which comprised the overwhelming majority of household FX loans, on account of the Swiss franc’s 60-per cent appreciation against the forint between 2008 and November 2014 when the technical forint conversion took place, a revaluation effect amounting to around HUF 1,400 billion may have taken hold in connection with the FX loans shown by our estimate to have been crowded-out by the end of 2008, amounting to roughly HUF 2,300 billion, with regard to the change in repayment instalments at that time
Figure 9
Costs of banking system and households in case of FX loan forint conversions, under different scenarios
–250 –225 –200 –175 –150 –125 –100 –75 –50 –25 0
–250 –225 –200 –175 –150 –125 –100 –75 –50 –25 HUF Billions 0
HUF Billions Banks Households
2006 2007
2004
2003 2005 2008 2006 20072007 20042003 2005 2008
75 per cent 50 per cent 25 per cent
Note: In the case of the annual adjustment requirement, the annual amount of debt servicing (DS) for households and lost debt servicing for banks, with refinancing through various amounts of forint loans, assuming a 10-year average loan maturity. Crowded-out FX loans in the case of the regulation used in the previous year, with proportionate refinancing.
Source: MNB
and the remaining principal in 2014.16 In other words, the early introduction of the regulation would have saved the public this much in losses, which in itself is many times higher than the households’ and banks’ estimated losses combined. The regulations would have reduced excessive risk-taking by banks and households by internalising risks.
6. Summary
Building on the experiences from the 2008 global financial crisis, the MNB devised a comprehensive set of rules, mainly comprising regulations managing currency mismatches and short-term liquidity. To gain a rough picture about the extent by which these reduce the vulnerability of the banking system and thus also the economy, it was examined what impact the pre-crisis implementation of the above-described rules would have had. The backtesting calculation suggests that the liquidity and funding regulations introduced since 2012 would have considerably mitigated the vulnerability of individual banks, the banking sector as a whole and the entire national economy, had they been implemented before the crisis.
With respect to compliance with the regulations, in the case of a liability-side adjustment only, all banks would have improved their ratios, achieving full compliance. However, when the liability-side adjustment is constrained and an asset-side adjustment is permitted, about half of the banks would have been unable to meet all the requirements by relying only on the adjustment methods that were deemed easy to implement and proportionally cost-effective. In all cases, banks would have been forced to adjust the most by the FFAR: in the case of an asset-side adjustment, this would have been the least likely to be met by banks.
The backtesting results show that the short-term interbank external debt would have been substantially lower in all scenarios, which would have translated into considerably lower vulnerability and a smaller international reserve requirement.
With an asset-side adjustment, the volume of retail FX loans should have contracted as well through forint conversion, or it would have been unable to build up in the first place, due to the regulatory constraints. These adjustments would have materially improved the stability of the financial system, thereby mitigating the national economy’s vulnerability. Finally, the analysis described here also underlines the significance of timing. The costs associated with the adjustment would probably have been much lower than the losses arising from the flawed funding and lending practices. Nevertheless, if the measures had been introduced in 2008, the necessary adjustment would have meant a shock to the banking system. However, this would have been avoidable with an appropriately communicated and timely introduction.
16 The increased burden caused by the higher interest rates on forint loans was already taken into account among the costs of the regulation.
This analysis backtested the MNB’s current liquidity and funding instruments to show that the applied rules can effectively forestall the financial stress observed in crises, for example in the wake of the present coronavirus pandemic. The rules under review may prevent banks from their over-reliance on short-term, mainly external FX funds, funds from financial corporations or off-balance sheet derivative transactions, which are considered riskier. So based on this analysis, one may argue that the tested instruments would have been able to mitigate the risks associated with excessive FX lending and the high costs incurred by the national economy in connection with this, by internalising the costs of these funding practices paid by households and the banking system.
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Annex
Figure 10
Distribution of banks’ initial and post-adjustment LCR values by years
0.0
2003before after before after before after before after before after before after before after before after before after before after before after before after
2005 2008 2006 20072007 20042003 2005 2008
Average of banks Minimum limit of LCR
Note: The chart shows the minimum and maximum values, the first and third quartile and the average.
Source: MNB
Figure 11
Distribution of banks’ initial and post-adjustment FECR values by years
–0.5
2003before after before after before after before after before after before after before after before after before after before after before after before after
2005 2008 2006 20072007 20042003 2005 2008
Average of banks FECR lower and upper limit
Note: The chart shows the minimum and maximum values, the first and third quartile and the average.
Source: MNB
Figure 12
Distribution of banks’ initial and post-adjustment FFAR values by years
0.0
2003before after before after before after before after before after before after before after before after before after before after before after before after
2005 2008 2006 20072007 20042003 2005 2008
Average of banks Minimum limit of FFAR
Note: The chart shows the minimum and maximum values, the first and third quartile and the average.
Source: MNB
Figure 13
Distribution of banks’ initial and post-adjustment IFR values by years
0.0
2003before after before after before after before after before after before after before after before after before after before after before after before after
2005 2008 2006 20072007 20042003 2005 2008
Average of banks Maximum limit of IFR
Note: The chart shows the minimum and maximum values, the first and third quartile and the average.
Source: MNB