Author information:
Péter Fáykiss: Magyar Nemzeti Bank, Director. E-mail: faykissp@mnb.hu
Alexandr Palicz: Magyar Nemzeti Bank, Analyst. E-mail: palicza@mnb.hu
János Szakács: Magyar Nemzeti Bank, Head of Department. E-mail: szakacsj@mnb.hu
Márton Zsigó: Magyar Nemzeti Bank, Analyst. E-mail: zsigoma@mnb.hu
Abstract:
The 2008 financial crisis underlined that, on the one hand, the operation of the banking sector is highly procyclical and, on the other hand, household borrowers are unable to assess their long-term ability to repay realistically. The resultant excessive risk-taking and inadequate risk assessment by banks brought, in Hungary as well, substantial losses for banks and a high rate of distressed customers. Through the enforcement of debt cap rules, the MNB as a macroprudential authority has been limiting the recurrence of excessive household indebtedness in a preventive manner since 2015. Focusing on international practices and the results of Hungarian regulations in the first two and a half years, we reviewed the Hungarian experiences with regard to the debt cap rules. Although we can only draw preliminary conclusions due to the shortness of the period elapsed since the introduction of the debt cap rules, our analysis demonstrates that, in line with their calibration, Hungarian debt cap rules currently do not restrict sustainable lending processes, and contribute significantly to promoting a healthy lending structure by restraining excessively risky loans.
Cite as (APA):
Fáykiss, P., Palicz, A., Szakács, J., & Zsigó, M. (2018). Experiences of Debt Cap Regulations in Hungarian Retail Lending. Financial and Economic Review, 17(1), 34–61. https://doi.org/10.25201/FER.17.1.3461
Column:
Study
Journal of Economic Literature (JEL) codes:
E32, E58, G21, R31
Keywords:
financial stability, housing market overheatedness, excessive lending, macroprudential policy, debt cap rules, loan-to-value ratio, payment-to-income ratio
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