MKB might have faced difficulties in longer term; central bank to act similarly if problems arise with other banks; European Commission wants details on state aid compliance
Reuters
Budapest
Hungary’s MKB Bank is not insolvent but might have faced longer-term problems if the central bank (NBH) had not taken control of it, deputy NBH governor Adam Balog said yesterday.
The NBH announced on Thursday that it had stepped in to reorganise loss-making MKB, just five months after the government bought it from Germany’s BayernLB.
The takeover of MKB was the first step in Prime Minister Viktor Orban’s campaign to boost Hungarian ownership in the financial sector, where foreign banks had a dominant role in the past decade. After five years of big windfall taxes and government measures that cost banks billions of euros, Orban has now stepped up efforts to shake up the sector.
The European Commission’s office in Budapest told Reuters it would ask Hungary for details of the MKB transfer to the central bank to see if it was compliant with EU rules on state aid.
MKB was Hungary’s fifth-largest lender by assets, based on end-2013 central bank figures. Balog said about 15-20% of its assets were problematic, while 80% was in good shape. The bad assets will be hived off and sold, he said. “The bank is not insolvent at the moment and will not be in the short term either,” Balog told a news conference.
“We believed that in the long term if we don’t do anything, in more than one year, if there are no changes, if we don’t separate this small but toxic portfolio, then the issues which the law on bank security prescribes could have arisen.”
The deputy governor said the NBH had informed the European Central Bank of its action in good time. It would act similarly if the same situation arose at any other bank, but it was not currently preparing any such steps, he said.
Balog said the reorganisation of the bank was not expected to cost taxpayers anything.
BayernLB sold MKB to the Hungarian government in July, ending an ill-fated investment that cost it a total of €2bn in losses over the last 20 years.
The central bank has said cleaning up MKB’s books could significantly reduce its capital needs and improve its profitability.
Hungarian Prime Minister Viktor Orban (right) and Hungary’s central bank Governor Gyorgy Matolcsy hold a joint news conference in Budapest on Thursday. The European Commission’s office in Budapest said it would ask Hungary for details of the MKB transfer to the central bank to see if it was compliant with EU rules on state aid.