Agricultual loans from Hungarian banks are among the most exposed to climate transition risks. © Andrew Bossi
A record amount of Hungarian bank loan portfolios are exposed to climate transition risk, the country’s central bank reported in its yearly sustainable finance report.
The Magyar Nemzeti Bank (MNB) said its bank carbon risk index was at the highest level ever in 2023, with over 16% of loan portfolios at risk, an increase of 2.66% from the prior year. Loans to energy production and agriculture were the most exposed to transition risks as they received more financing.
The index was introduced in 2021 to measure carbon-heavy loans and uses greenhouse gas intensity data.
Meanwhile, according to MNB’s climate risk matrix, bank portfolios’ climate exposure skyrocketed in 2023. The metric classifies financial institutions into five groups based on the riskiness of their portfolios, with companies in the top groups being most exposed to transition risk.
While the amount of assets in the riskiest group fell from 3% to below 1%, the number of assets in the second riskiest group rose to 61% compared to just 15% in 2022.
The MNB also reported that it helped facilitate 880bn forint (around €2.2bn) in green loans in 2023 by extending a green capital discount programme. The majority were corporate loans, followed by housing loans and green bonds.
The MNB is one of the few regulators globally that has preferential capital treatment. This allows Hungarian banks to reduce their regulatory capital requirements if they make sustainable green bonds and loans that meet specific criteria.
Firms that participated in the programme had lower default rates, with many of the corporate loans made being linked to renewable energy projects.
“The programme has empirically proven the green hypothesis; namely, that green exposures are indeed less risky,” the MNB said in its report.
European regulators had contemplated introducing a similar programme through the European Central Bank but decided against it last year over concerns it could lead to overbalanced risk and may not support a just transition.
The MNB scored higher than any other G20 country in a self-assessment of the Green Central Banking Scorecard, largely due to its green monetary and financial policy efforts.
This page was last updated August 23, 2024
Written by
Moriah Costa is the Editor-in-Chief of Green Central Banking and has over a decade of experience writing about banking and finance. She is an award-winning American journalist based in Paris and has written for major international publications, including Reuters, The Guardian, and S&P Global. Having grown up in water-stressed Arizona, she has always had a strong interest in bringing awareness to climate and environmental issues.
