Home High Above and Home Deep Down Below -- Lending in Hungary

34 Pages Posted: 20 Apr 2016

See all articles by Adam Banai

Adam Banai

Magyar Nemzeti Bank

Julia Kiraly

International Business School - Budapest (IBS)

Márton Nagy

Magyar Nemzeti Bank

Date Written: October 1, 2011

Abstract

In Hungary in the pre-crisis period, the bank sector-initiated private credit boom significantly contributed to the accumulation of economic imbalances. Nevertheless, before the 2008 crisis no special regulatory measure was taken to mitigate the foreign exchange lending to unhedged borrowers, which was a main moving force of the credit boom. Depreciation of forint-denominated subsidized housing loans and the increased risk premium significantly deteriorated customers' positions and resulted in rocketing nonperforming loans. A recession, deteriorating portfolios, and lack of efficient workout. The introduction of strict regulation froze banking activity and the danger of recovery without lending emerged. This paper compares the pre- and post-crisis lending activity and analyzes the lack of regulation in the pre-crisis period and the inefficient regulation in the post-crisis period.

Keywords: Debt Markets, Banks & Banking Reform, Currencies and Exchange Rates, Bankruptcy and Resolution of Financial Distress, Emerging Markets

Suggested Citation

Banai, Adam and Kiraly, Julia and Nagy, Marton, Home High Above and Home Deep Down Below -- Lending in Hungary (October 1, 2011). World Bank Policy Research Working Paper No. 5836. Available at SSRN: https://ssrn.com/abstract=1939727

Adam Banai (Contact Author)

Magyar Nemzeti Bank ( email )

Szabadsag ter 8-9
Budapest, H-1850
Hungary

Julia Kiraly

International Business School - Budapest (IBS) ( email )

Zrinyi u. 14
1051. Budapest, 1020
Hungary

Marton Nagy

Magyar Nemzeti Bank ( email )

Szabadsag ter 8-9
Budapest, H-1850
Hungary

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