MNB launches green monetary policy strategy

July 13, 2021|Written by Graham Caswell|Magyar Nemzeti Bank

Hungary’s central bank, the Magyar Nemzeti Bank (MNB), has published a green monetary policy toolkit outlining a strategy for introducing climate objectives into its monetary policy.

Accompanying the strategy was a green home programme, offering targeted and preferential refinancing to banks lending for energy-efficient housing, as well as a green mortgage bond purchase programme.

“Environmental sustainability considerations do not affect the general orientation of monetary policy,” the central bank said in a press release announcing the publication. “The MNB’s goal is to ensure that the monetary policy tools can efficiently support the transition towards a sustainable economic development and convergence, while price stability remains the primary objective.”

The MNB report gives an overview of how the MNB has already integrated climate into its operations. This includes last year’s introduction of preferential capital requirements for green bonds and the bank’s central role in the launch and rapid growth of Hungary’s green bond market.

The bank was also the first financial supervisory authority in the world to introduce a preferential capital requirement for banks offering energy-efficient housing loans, implemented at the beginning of 2020

The new green bond and green refinancing programmes are both aimed at boosting green mortgage lending. The MNB will “encourage the issuance of green mortgage bonds on both the demand and supply sides,”  and will offer bank refinancing at 0% interest, to be lent to residential customers at a maximum of 2.5%. Each new programme will have a maximum limit of HUF 200 billion (€56 billion).

Future directions for the MNB’s green monetary policy include the introduction of a ‘green haircut’ into the bank’s collateral management practices, which is expected later this year. Also planned is adjustment sto its systemic risk capital buffer to require higher rates from more environmentally risky exposures.

The MNB will also monitor international central bank trends looking for opportunities to green its reserve management, specifically referencing the negative screening of high-carbon assets as a possibility. It will also develop indicators and targets relating to climate risks and will publish its own TCFD-aligned disclosures.

The Hungarian parliament recently expanded the mandate of the MNB to include support of the government’s policy linked to environmental sustainability in the bank’s remit.

This page was last updated July 13, 2021

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