Opinion of the European Central Bank of 11 June 2021 on the regulation of the forint maturity mismatch of credit institutions (CON/2021/22)
Date: 2021-06-11
Institutions: European Central Bank
Subjects: financial stability

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/2021/22) 

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 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 and purpose 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 funds 2. 

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 0.20 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 situation, in March 2020 

the MNB eased this 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 providing that credit institutions may take into account green mortgage bonds issued and 

green refinancing loans received with a 150 per cent weighting when calculating the MFAR. As noted 

in  the  explanatory  memorandum  accompanying  the  draft  decree,  the  preferential  treatment  is 

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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). 

See the Magyar Nemzeti Bank, Macroprudential Report 2017, available at: 
https://www.mnb.hu/letoltes/makroprudencialis-jelentes-en.pdf. 

See the Magyar Nemzeti Bank, Macroprudential Report 2017, available at: 
https://www.mnb.hu/letoltes/makroprudencialis-jelentes-en.pdf. 
See the MNB Decree 55/2016 (XII. 22.) amending the MNB Decree 20/2015 (VI. 29.). 

See the MNB Decree 5/2020 (III. 19.) amending the MNB Decree 20/2015 (VI. 29.). 

 
 
 
 
 
 
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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 investor 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 this 

conformity is certified by an external party.  

1.5 

In parallel with the preferential treatment of green funds, the 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  an  amended  form,  disincentivising  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  Programme’  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 relating to environmental 

sustainability 9.  As  the  ECB  has  recently  noted,  physical  risks  and  transition  risks  associated  with 

climate change may cause abrupt changes in prices and thereby threaten price stability 10. 

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  increasingly  clear  from  available  estimates  that  the 

impact of these risks is likely to be significant11. 

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Available  at:  https://www.icmagroup.org/sustainable-finance/the-principles-guidelines-and-handbooks/green-bond-
principles-gbp/. 
Available at: https://www.climatebonds.net/climate-bonds-standard-v3. 

Available at: https://www.mnb.hu/greenfinance/english. 
See paragraph 2.1 of Opinion CON/2021/12. All ECB opinions are published on EUR-Lex. 
See paragraph 2.4 of Opinion CON/2021/12. 

See paragraph 2.4 of Opinion CON/2021/12; European Central Bank, Financial Stability Review May 2021, p. 12. 

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2.3  The ECB acknowledges that there is some preliminary evidence of a risk differential between green 

and other assets 12. 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  consideration  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  inherent  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  Union  green  bond 

standards. 

This opinion will be 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  mortgage  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 Default: The Dutch 
Case’, available at www.econpapers.repec.org. 

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