EN ECB -PUBLIC  
OPINION OF THE EUROPEAN CENTRAL BANK  
of 11 June 2021  
on the regulation of the forint maturity mismatch of credit institutions  
(CON/20 21/22) 
 
Introduction and legal basis  
On 19 May 2021 the European Central Bank (ECB) received a request from the Magyar Nemzeti Bank  
(MNB)  for an opinion on a draft MNB Decree replacing the MNB Decree 20/2015 (VI. 29.) on the regulation 
of the  forint maturity mismatch of credit institutions (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 concerns rul es 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 and p urpose of the draft decree  
1.1 When  the long-term foreign currency mortgage loans were converted into forint  in 2015, the forint 
maturity mismatch increased substantially in the domestic banking system, as mortgage loans 
converted into forint had maturities of over 10 years, which were financed by short -term forint  funds2. 
To tackle the maturity mismatch, the MNB introduced the mortgage funding adequacy ratio 
(hereinafter  the ‘MFAR’). The MFAR requires that credit institutions must finance a given part of their 
forint residential mortgage loans with  long-term mortgage- backed  liabilities3. In 2017, the minimum 
ratio was 0.15, and this ratio was increased to 0.2 0 in 2018 and 0.25 in 20194. 
1.2 In order  to channel long term funding for mortgage lending, the MNB disincentivised cross -ownership 
of mortgage bonds  by other credit institutions . In the light of the pandemic situa tion, in March 2020 
the MNB eased th is by temporarily removing the cross -ownership adjustment coefficient5. 
1.3 The draft decree introduces a preferential treatment for green mortgage bonds and green refinancing 
loans by provid ing that credit institutions may take into account green mortgage bonds issued and 
green refinancing loans received with a 150 per cent weight ing when calculating the MFAR. As noted 
in the explanatory memorandum accompanying the draft decree, t he preferential treatment is 
 
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  See the Magyar Nemzeti Bank, Macroprudential Report 2017 , available at : 
 https://www.mnb.hu/letoltes/makroprudencialis- jelentes- en.pdf . 
3  See the Magyar Nemzeti Bank, Macroprudential Report 2017, available at:  
 https://www.mnb.hu/letoltes/makroprudencialis- jelentes- en.pdf.  
4  See the MNB Decree 55/2016 (XII. 22.) amending the MNB Decree 20/2015 (VI. 29.).  
5  See the MNB Decree 5/2020 (III. 19.) amending the MNB Decree 20/2015 (VI. 29.).  
ECB -PUBLIC  
2 introduced because the MNB  considers that  green lending and green mortgage bond issuances have 
a positive impact on financial stability. These instruments may also have a lower credit risk as a result 
of lower utility costs and house prices that are more resilient to shocks . Furthermore,  a more 
diversified mortgage bond i nvestor base facilitates the stable funding of the banking system.  
1.4 Instead of introducing an autonomous definition of green bonds  the draft decree provides that all 
mortgage bonds qualify as green if , based on documentation publicly disclosed by the issuer , they 
are in conformity with the Green Bond Principles 2018 issued by the International Capital Market 
Association6 or the Climate Bonds Standard V3.0 issued by the Climate Bonds Initiative7, and thi s 
conformity is certified by an external party.  
1.5 In parallel with the preferential treatment of green funds, t he draft decree introduces a number of 
further changes  to support the objectives of the MFAR regulation: (i) the required level of the MFAR  
will increase from 0.25 to 0.30 ; (ii) green mortgage- based funds must  have an original maturity of at 
least 5 years  instead of the 3- year limit applicable to other funds ; (iii) all mortgage bonds must  be 
listed on a stock exchange in order to be eligible for inclusion in the calculation of the ratio;  and 
(iv) the restrictions on cross- ownership by other credit institutions which were suspended due to the 
coronavirus pandemic will be reintroduced in a n amended form, disincentivis ing such cross-
ownership  by applying a correction factor , which is calculated based on the ratio of mortgage bonds 
owned to total assets.  
 
2. General observations  
2.1 The MNB launched its ‘ Green Program me’ in 2019 to mitigate the risks associated with climate 
change and other environmental problems, to expand green financial services in Hungary, to widen 
the related knowledge base in Hungary and abroad, and to reduce financial market participants’ and 
its own ecological footprint8. The ECB welcomes  the MNB’s commitments relatin g to environmental 
sustainability9. As the ECB has recently noted, p hysical risks and transition risks associated with 
climate change may  cause abrupt changes in prices and thereby threaten price stability10. 
2.2 The ECB broadly welcomes policies and initiatives that contribute to mitigating risks related to climate 
change. Although methodologies to assess the magnitude of climate- related risks for banks and 
financial stability are still in their infancy , it is increas ingly clear from available estimates that the 
impact of these risks is likely to be significant11. 
 
6  Available at: https://www.icmagroup.org/sustainable- finance/the- principles -guidelines -and-handbooks/green -bond-
principles -gbp/. 
7  Available at: https://www.climatebonds.net/climate- bonds- standard -v3. 
8  Available at: https://www.mnb.hu/greenfinance/english . 
9  See paragraph 2.1 of Opinion CON/2021/12. All ECB opinions are published on EUR -Lex. 
10  See paragraph 2.4 of Opinion CON/2021/12.  
11  See paragraph 2.4 of Opinion CON/2021/12; European Central Bank, Financial Stability Review May 2021 , p. 12. 
 
ECB -PUBLIC  
3 2.3 The ECB acknowledges that there is some preliminary evidence of  a risk differential between green 
and other assets12. In order to ensure that the prudential framework remains risk -based, evidence 
relating to the risk differential of green and other bonds should be taken into consider ation  when 
calibrating  a dedicated prudential treatment . The ECB therefore notes the importance of collecting 
and assessing data  on the riskiness of green mortgage loans and bonds . Regarding the proposed 
preferential treatment  of green mortgage bonds and green refinancing loans in the numerator of the 
MFAR , the ECB recognises the challenges in herent to the task of providing such analysis and 
encourages the MNB to continue to make efforts in this direction to ensure the proper calibration of 
the measure in the coming years. As the prudential policy for climate change is rapidly evolving at 
both the European and global level, the ECB also fully supports the ongoing alignment of the MNB ’s 
regulatory approaches  to ensure consistency, specifically  with forthcoming U nion green bond 
standards . 
 
This opinion will b e published on EUR -Lex.  
 
 
Done at Frankfurt am Main, 11 June 2021.  
 
[signed]  
 
The President of the ECB  
Christine  LAGARDE  
 
12  See also the Bank of England Staff Working Paper No. 852 , Benjamin Guin and Perttu Korhonen,  ‘Does energy 
efficiency predict mortg age performance? ’, January 2020, available at www.bankofengland.co.uk;  The Energy 
efficiency Data Protocol and Portal Final report on correlation analysis between energy efficiency and risk , available 
at www.eedapp.energyefficientmortgages.eu; and the EconPapers  report No. 2020:06 , Monica Billio, Michele Costola, 
Loriana Pelizzon  and Max Riedel , ‘Buildings’ Energy Efficiency and the Probability of Mortgage D efault: The Dutch 
Case ’, available at www.econpapers.repec.org.