EN ECB -PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 21 May 2015  
on regulating open positions  in assets on the balance sheets  of credit institutions  
(CON/201 5/15) 
 
Introduction and legal basis  
On 9 April 2015 , the European Central Bank (ECB) received a request from the Magyar Nemzeti Bank  
(MNB ) for an opinion on two  draft decrees.  
The first  draft decree amends MNB Decree 14/20141 to address maturity mismatch es in credit 
institutions’ foreign currency positions (hereinafter the ‘ draft decree on maturity mismatch es in foreign 
currency positions ’).  
The second defines the rules applicable to the denomination of credit institutions’ assets and liabilities .   
On 10 April 2015 the ECB received a further request from the MNB for an opinion on a draft decree 
regulating maturity  mismatch es in credit institutions’ Hungarian forint  (HUF)  positions . Given that the 
three draft decrees  concern related issues , the ECB has adopted one single opinion.   
The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of t he Treaty on the 
Functioning of the European Union and the sixth  indent of Article 2(1) of Council Decision 98/415/EC2, as 
the three draft decrees  concern rules applicable to financial institutions insofar as they materially 
influence the stability of financial institutions and markets . In accordance with the first sentence of 
Article  17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted 
this opinion.  
 
1. Background information and the p urpose of the draft decrees  
1.1 The ECB was consulted on MNB Decree 14/2014 in its draft form in 2014 and adopted Opinion 
CON/2014/153. As indicated, the draft decree on maturity mismatches in foreign currency positions  
amends  MNB Decree 14/2014. B y doing so, it aims to  enhance the stability of the financial system 
by means of (a) derecognising long term  (meaning those with a maturity greater than one year)  net 
FX swaps against HUF as an accepted  source of stable long- term funding,  and (b) bringing forward 
the full implementation of the Foreign Funding Adequacy Ratio ( FFAR ) requirement by 15 months 
to 1 October 2015.  
                                                           
1  MNB Decree 14/2014 (V.19.) regulating c redit institutions’ maturity mismatches  in foreign currency positions and 
amending MNB Decree 43/2013 (XII. 29.) on the obligations of money and credit market institutions to report data to 
the central bank’s information system primarily to enable the Magyar Nemzeti Bank to carry out  its supervisory 
duties.  
2  Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft legislative provisions ( OJ L 189, 3.7.1998, p. 42) . 
3  See Opinion C ON/2014/15.  All ECB opinions are available on the ECB’s website at www.ecb.europa.eu.  
ECB -PUBLIC  
2 1.2 The draft decree on denomination of credit institutions’ assets and liabilities, introduces  a new 
macro -prudential tool,  the foreign exchange coverage ratio (FECR),  aime d at limiting the overall 
level of currency mismatch es of credit institutions in Hungar y. It sets a maximum absolute FECR  
of 15%. 
1.3 The draft decree on maturity mismatches in HUF positions  introduces the Mortgage Funding 
Adequacy Ratio (MFAR) , which targets excessive maturity mismatches  between mortgage loans 
denominated in HUF  and their funding sources. The explanatory memorandum attached to this  
draft decree states that the conversion of foreign currency loans into HUF , which took place on 
1 February 2015, resulted in ‘ serious systemic HUF maturity mismatches ’. The MFAR requires 
credit institutions’ share of HUF-denominated mortgage- backed liabilities to reach at least  15% of 
the total value of their residential mortgage loans by 1 July 20164.  
 
2. Gener al Observations  
2.1 Recent major legislative changes in Hungary5 have significantly weighed on the profitability of the 
banking sector with possible implications for its capital position.  
2.2 The explanatory memoranda  attached to the draft decrees  state  that the proposed measures are 
justified by those recent legislative changes and may be instrumental in addressing potential 
sources of systemic risk . The ECB emphasi ses the need for constant monitoring of the new 
measures and the required ratios . The ECB al so recommends that the MNB consider preparing an 
impact assessment of the measures contained  in the three draft decrees on the Hungarian banking 
sector  as well as on its capital position . 
2.3 In Opinion CON/2014/15 the ECB noted that the provisions of MNB Decree 2014/14 regarding 
maturity mismatches in foreign currency positions  would benefit from being aligned with the N et 
Stable Funding Ratio (NSFR) currently being developed by the Basel Committee on Banking 
Supervision (BCBS)  under the Basel III framewor k. The ECB reiterates the need to a lign MNB 
Decree 2014/14 with the N SFR upon its finalisation by the BCBS  and subsequent implementation  
in the E uropean Union. 
 
3. Specific Observation  
3.1 As regards p oint 3(d) of Annex 1 of the draft decree on maturity mismatch es in HUF positions , 
which prohibits a credit institution from  taking into account  liabilities recorded on the balance 
sheet s of other members of the group when calculating the MFAR , the ECB notes the aim of this 
draft decree of ensuring that credit  institutions ’ external funding sources  are more balanced. The 
ECB also takes note of p oint 4 of Annex 1 of this draft decree, which eases  the conditions for 
certain assets  to be accepted as stable long- term funding sources . The consulting authority should  
pay due attention to whether these measures  provide for a level  playing field for all market 
                                                           
4  The draft decree on mismatches in HUF positions defines the types of asset s and liabilities which may be used to 
calculate the MFAR and sets a number of eligibility conditions.  
5  For more details on these legislative measures see the following ECB Opinions: CON/2014/59, CON/2014/72, 
CON/2014/76, CON/2014/85 and CON/2014/87.  
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3 participants , particularly as regards  whether they are currently entitled to issue mortgage bonds or 
not. The timing of the introduction of  these measures should a lso foster a level playing field .  
3.2 The ECB understands that credit  institutions which do not already operate mortgage units will need 
to rely on licensed market participants to fulfil the MFAR requirements set out in points 2(c) and (d) 
of Annex 1 of the draft decree on maturity mismatch es in HUF positions , alternatively , they will 
have to  set up a separate subsidiary  for the issuance of mortgage bonds  or mortgage backed 
securities acceptable for MFAR  purposes . Against this background and with a view to  ensuring a 
level playing field , the ECB underlines the importance of operating a smooth and efficient  licensing 
mechanism in Hungary that will allow credit  institutions to have equal access to the mortgage bond 
market or other forms of external funding,  in order to ensure their ability  to meet the MFAR 
requirements in the future.  
 
This opinion will be published on the ECB’s website.  
 
 Done at Frankfurt am Main, 21 May 2015.  
 [signed]  
 
The President of the ECB  
Mario DRAGHI