MNB puts sectoral buffers in place as real estate pressure mounts

Introducing the Systemic Risk Buffer by The Central Bank of Hungary

The Central Bank of Hungary, known as Magyar Nemzeti Bank (MNB), has revealed its plans to implement a 1% sectoral systemic risk buffer (sSyRB) for real estate loans, effective from January 1, 2026. This measure comes in response to the increasing pressures in the real estate sector and is aimed at enhancing financial stability.

Background and Implementation of the sSyRB

MNB first announced its intention to introduce the sSyRB when it reviewed its macro-prudential toolkit in September. After months of discussions and consultations with market participants, it finalised the conditions for its implementation in December. The bank has confirmed that the new buffer will be applicable to exposures backed by both residential and commercial real estate, thereby covering a broad segment of the market.

Understanding the Purpose of the Systemic Risk Buffer

The systemic risk buffer is a macroprudential instrument designed to address long-term, non-cyclical systemic or macroprudential risks associated with the environment of institutions, markets, or products. By applying this buffer to real estate loans, MNB aims to reduce the potential systemic risks associated with this sector. It will provide an additional layer of protection to the financial system against potential losses that could be caused by a sudden downturn in the real estate market.

The Implication of the Buffer on Real Estate Market

While the introduction of a systemic risk buffer might initially seem like an additional burden to real estate investors and developers, it has the potential to create a more stable and resilient real estate market in Hungary. By ensuring that banks have additional capital buffers, the measure can help mitigate the impact of potential price corrections in the real estate sector, thereby protecting both the financial institutions and their customers.

Looking Ahead

As the Central Bank of Hungary moves forward with the implementation of the systemic risk buffer, it will be important for all market participants – from banks to real estate developers and investors – to understand the implications of this measure. Despite the immediate challenges it may pose, the systemic risk buffer is a step towards a more secure and resilient financial and real estate sector in Hungary.

Source: Here