Macro Digest: Hungary some good news: Funding for lending and fx reserves conversion at market rates

In a true copy of Bank of England - 'funding for lending" program (which has not worked) the Hungarian government have initiated a supply side initiative to provide much needed credit for the SME's sector.

 

The program is structurally a sound idea, but risk always banks will hoard the "cheap money" provided - directly or indirectly - the HUF is stronger on this and deservedly so, as the FX loans component will be at 'market rates' - many analyst feared the central bank would dip into the reserves to "remove" the big amount of CHF funding on both private- and bank books.

 

This is my country report from mid-March: Hungary: The Wasted political majority - which I still feel is valid although the government so far have surprised positively.

 

EURHUF is 300 points – deservedly  lower @ 299.50 from 302.50 open today.

 

Bloomberg story below:

 

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BN 04/04 09:23 *HUNGARY TO USE CENTRAL BANK RESERVES IN GROWTH PLAN: MATOLCSY

 

 

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MORE: Hungary to Use Central Bank Reserves in Growth Plan

2013-04-04 09:33:35.590 GMT

 

 

By Zoltan Simon

     April 4 (Bloomberg) -- Central bank starts "Funding for Growth Scheme" to boost growth as priorities of CPI, stability allow support of govt goals, Magyar Nemzeti Bank President Gyorgy Matolcsy says at news conference in Budapest.

  * Central bank to provide 250b forint to commercial banks at

    zero interest rate, Matolcsy says

  * Banks to lend at 2% maximum to SMEs from central bank

    funding, Matolcsy says

  * Central bank to provide 250b forint fx-loan conversion plan

    for SMEs, Matolcsy says

  * Loan conversions to be at market rate, Matolcsy says

  * Hungary seeks to cut amount in 2-week central bank bonds by

    900b forint, Matolcsy says

  * Hungary lending plan to be "targeted" for 3 months,

    Matolcsy says

 

To contact the editor responsible for this story:

Balazs Penz at +36-1-475-1191 or

bpenz@bloomberg.net

 

 

 

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