Green preferential capital requirement programme

Improving the energy performance of Hungary's housing stock is an indispensable prerequisite for meeting the climate targets for reducing energy consumption in Hungary. The MNB's Green Housing Preferential Capital Requirement Programme aims to support the construction of new housing of good energy quality; the renovation of old, substandard housing; and the financing of specific energy efficiency measures.

In view of the transition risk¹ associated with climate change and other environmental anomalies, the MNB considers it desirable that the share of environmentally sustainable (green) industries and customers in banks' balance sheets should increase compared to ‘brown’ industries and customers, i.e. ones that are more exposed to tightening environmental regulations (and therefore carrying higher longer-term risks). The MNB's corporate and municipal green preferential capital requirement programme aims to green the portfolios of banks, i.e. reduce their exposure to climate risk. The scheme provides a capital requirement discount for exposures that are considered green for institutions that commit to the reporting requirements necessary to participate in the scheme. The discount is available for corporate and municipal loans and bonds.

¹Business risk arising from economic and social changes due to climate change and other environmental anomalies, which primarily increases credit and market risk for bank exposures by reducing the profitability of companies operating unsustainably.