Improving resolution of non-performing loans in Hungary

Non-performing loans (NPLs) are a millstone around the neck of emerging Europe’s banking system and are preventing the region from reaching its full growth potential.

In Hungary, the NPL ratio reached a peak of 20 per cent in the wake of the 2008-09 financial crisis, although this had fallen to 10 per cent by June 2016. Last year the EBRD conducted a technical cooperation project in support of NPL resolution with 16 banks, the Central Bank of Hungary (MNB) and asset management company MARK.

The project recommended that MNB take a more active role in promoting out-of-court restructuring by issuing non-binding guidance on international best practice for this process in relation to corporate loans. The MNB guidance, due to come into effect in mid-May 2017, should help lenders to better manage existing NPLs and prevent high NPL levels in the future.