EN ECB -PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 6 February 2018  
on the reliance of credit institutions on fu nds originating from financial corporations  
(CON/20 18/7) 
 
Introduction and legal basis  
On 15 December 2017 the European Central Bank (ECB) received a reques t from the Magyar Nemzeti 
Bank (the ‘ MNB ’) for an opinion on a draft MNB decree on the regulation of the reliance of credit 
institutions on funds  originating  from financial corporations (hereinafter the ‘ draft decree’ ). 
The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the sixth  indent of Article 2(1) of Council Decision 98/415/EC1, as 
the draft  decree contains rules applicable to financial institutions insofar as the y 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. Purpose of the draft decree  
1.1 The draft decree is a targeted macro- prudential measure aimed at preventing the build- up of 
excessive reliance by credit institutions on wholesale funding. To this end, t he draft decree sets a 
maximum limit  on the share of the total funding of credit institutions originating from financial 
corporations. The MNB considers that  although wholesale funding is not currently at an excessive 
level in the Hungarian banking sector, the potentially  significant role of such funding in the banks ’ 
funding str ucture and composition justif ies the need for preventive macro- prudential  measures .  
1.2 The draft decree lays down  a limit for a n interbank funding ratio (IFR), which is defined as the 
weighted amount of liabilities originat ing from financial corporations , divided by the balance sheet 
total excluding own funds , and which is set to be at a maximum of 30%  as of 1 July 2018.  
1.3 The limit will apply  in respect of entities covered by the scope of the draft decree, which includes : 
credit institutions operating as limited companies (with specific enumerated exceptions) ; Hungarian 
branches of foreign credit institutions ; and entities belonging to groups  which include credit 
institutions  and fall under consolidated supervision pursuant to Law CCXXXVII of 2013 on cr edit 
institutions and financial enterprises2 and Law CXXXV of 2013 on the integration of cooperative 
                                                 
1  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) . 
2  2013. évi CCXXXVII. Törvény a hitelintézetekről és a pénzügyi vállalkozásokról , published in Magyar Közlöny 
217/2013 on 23 December 2013.  
ECB -PUBLIC  
2 credit institutions3. The limit will not be applicable to entities  exempt from the scope of the draft 
decree, which includes:  credit institutions with a ba lance sheet total of less than HUF 30 billion  
(approx. EUR 100 million) ; home sav ings and loan associations ; two Hungarian institutions outside 
the scope of Directive 2013/36/EU of the European Parliament and of the Council4 (Magyar 
Fejlesztési Bank Zártkörűen Működő Részvénytársaság and Magyar Export -Import Bank 
Zártkörűen Működő Részvénytársaság) ; and KELER Ltd., the Hungarian central securities 
depository . 
1.4 For the purposes of calculating the IFR, t he draft decree also specifies  those items that are not to 
be considered as liabilities originat ing from financial corporations  and are therefore exempt from 
being included in the numerator of the IFR formula.  This includes for example:  mortgage bonds ; 
refinancing mortgage loans ; bonds issued with a maturity  of two years or longer ; or any funds 
provided by foreign branches to Hungarian parent companies . In addition, with respect to the 
numerator of the IFR formula,  the draft decree also specifies certain weightings of liabilities  
originat ing from financial corporations  according to a six -pronged classification5, in which each 
category has a different weighting. The weighting of 0 to 100 percentage points generally depends 
on whether the liability is denominated in forint  (HUF) or in another currency and on the remaining 
maturity of the funds (liabilities) , with short -term and non- HUF denominated liabilities assigned a 
higher weighting.6 Moreover, the s pecific weighting of 0 to 20 percentage points  lower than the 
weighting of 0 to 100 percentage points  is to be assigned to either : (i) any  funds received from 
parent companies , as defined in Law  CCXXXVII of 2013 on credit institutions and financial 
enterprises7 or, in the case of a Hungarian branch of a foreign credit institution, from the 
establishing institution;  or (ii) the balance of  ‘loro’ accounts other  than those in point (i), defined as 
demand deposit or payment accounts maintained by a credit institution or a member of a group of 
credit institutions for credit institutions established outside Hungary for the purpose of providing 
financial services . 
1.5 The IFR limit should be complied with by both individual  and, in case of  group members 
established in Hungary , on a consolidated level.   
1.6 The IFR will be calculated on the basis of regular  reporting of credit institutions to the MNB.  
1.7 The IFR aims to rule out the overreliance of the banking system on funds originating from financial 
corporations  which are a highly volatile type of funding. Overall, the IFR  does not cover the whole 
liability side  of the balance sheet,  but only items originat ing from financial corporations, which, in 
the MNB’s view, have proven to be excessively volatile during crisis situations. The IFR  is not  
regarded as a preliminary stable funding or a net stable funding ratio ( NSFR ) type requirement or  a 
                                                 
3  2013. évi CXXXV. Törvény a szövetkezeti hitelintézetek integrációjáról és egyes gazdasági tárgyú jogszabályok 
módosításáról  published in Magyar Közlöny 12 0/2013 on 12 July 2013.  
4  Directive 2013/36/EU of the European Parliament and of the Council of  26 June 2013 on access to the activity of 
credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 
2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC  (OJ L 176, 27.6.2013, p. 338) . 
5  See Point 4 of the Annex  to the draft decree.  
6  It is specified that amounts on a deposit account shall be considered as having a maturity equalling to the earliest 
possibility of withdrawal.  
7 See Section 6, point 3 of 2013. évi CCXXXVII. Törvény a hitelintézetekről és a pénzügyi vállalkozásokról . 
ECB -PUBLIC  
3 requirement aim ed at the general diversification of  funding sources, but  rather as  a measure 
targeting one specific funding risk . The draft decree also intends to set differentiated requirements 
for funds with between 0 to 1 year and 1 to 2 year  remaining maturities . The MNB does not 
consider the IFR to be a derivation or early implementation of the NSFR, as provided for in 
Article  413(3) of Regulation (EU) No 575/2013 of the European Parliament and of the Council8, 
since in its current calibration it serves as a backstop measure aimed at  limiting the possibility of a 
build- up of systemic risks and  is therefore of a macro- prudential nature .  
 
2. General observations   
2.1 The ECB understands that the MNB intends to introduce the IFR as a national measure, based on 
national law,  targeting different systemic risks than those addressed by the standards for liquidity 
coverage requirements and net stable funding requirements laid down in the relevant EU regulatory 
framework, most notably Regulation (EU)  No 575/2013 .  
2.2 The IFR is intended  to complement the foreign funding adequacy ratio (FFAR) , a requirement  that 
is currently applicable for credit institutions  in respect of foreign exchange assets  and that is 
regulated by MNB Decree 14/20149. The FFAR is a systemic risk mitigation measure which aims  to 
regulat e the maturity mismatches  and foreign currency positions  of credit institutions .10 The ECB 
has previously noted that the FFAR is similar in concept to the NSFR developed by the Basel 
Committee on Banking Supervision, since it builds upon structural funding metrics that require 
banks to hold stable funding in relation to the composition of their assets. However, there are a 
number of differences between the NSFR and the FFAR11.  
 
3. Specific observations  
3.1 The ECB notes that the  risk of unstable funding sources is to be addressed by the NSFR  pursuant 
to Article 413 of Regulation (EU) No 575/2013.  Article 413(3) specifically provides that  Member 
States may maintain or introduce national provisions in the area of stable funding requirements 
before binding minimum standards for net stable funding requirements are specified and 
introduced in the Union in accordance with Article 510 of the same Regulation.  
3.2 The ECB agrees that the IFR is less complex than the NSFR being developed under the European 
Union regulatory framework as the NSFR addresses  risk stemming from undiversified funding 
more generally and also considers the funding needs of the assets held on the bal ance sheet. Both  
                                                 
8  Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential 
requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 1 76, 
27.6.2013, p. 1).  
9  14/2014. (V. 19.) MNB rendelet a hitelintézetek devizapozícióbeli lejárati összhangjának szabályozásáról, valamint a 
pénz-  és hitelpiaci szervezetek által a jegybanki információs rendszerhez elsődlegesen a Magyar Nemzeti Bank 
felügyeleti feladatai ellátása érdekében teljesítendő adatszolgáltatási kötelezettségekről szóló 43/2013. (XII. 29.) 
MNB rendelet módosításáról,  published in Magyar Közlöny 72/2014 on 19 May 2014.  
10  In the light of the fact that the volume of foreign currency- denominated mortgage lending to households expanded 
rapidly in Hungary until 2008 resulting in significant maturity mismatches, consequently increas ing Hungary’s need 
for foreign currency reserves. See Opinion CON/2014/15, as well as Opinions CON/2011/87 a nd CON/2012/27. All 
ECB opinions are published on the ECB’s website at www.ecb.europa.eu.  
11  See Opinions CON/2014/15 and CON/2015/15.  
ECB -PUBLIC  
4 metrics , nevertheless,  address the ri sk stemming from the excessive reliance by credit institutions 
on wholesale funding from financial corporations. In the light of this , the ECB suggests that the 
need for the IFR, as well as its calibration, be reassessed once the NSFR has been fully 
implem ented as a binding minimum ratio at the Union level . 
3.3 As a separate matter, t he ECB reiterates th at the need  for and calibration of the FFAR  laid down in  
MNB Decree 2014/14 should be reassessed with the implementation of the binding NSFR  in the 
European Uni on, as expressed in its previous opinions .12  
 
This opinion will be published on the ECB’s website.  
 
 
Done at Frankfurt am Main, 6 February 2018.  
 
[signed]  
 
The President of the ECB  
Mario DRAGHI  
                                                 
12  See Opinions  CON/2014/15 and CON/2015/15.