It is a basic economic notion that the economy and the banking system go hand in hand, ideally making each other stronger. The core business of the banking sector is to provide a continuous flow of credit to the economy, and in crises such as the current one it is particularly important that the sector's lending ability is not compromised. A banking system that operates under stable legal conditions and predictable market conditions is like an immune system that helps keep the economy healthy, but the formula also holds the other way round: legal uncertainty leads to distorted market conditions and reduced lending capacity, which, in turn, significantly reduces the banking sector’s ability to protect and strengthen the economy, and the weakening of the economy's immune system is inevitably associated with an increase in economic vulnerability and a slower convergence with the EU average.
One of the key pillars of SME lending during the Covid-19 pandemic was the range of products offered under the Széchenyi Card Programme, which made a significant contribution to satisfying the liquidity and investment requirements of SMEs. Adjusting these products to the higher interest rate environment would be of enormous help to businesses in the current period.
The Government Decree issued on the night of 26 October, which extends the interest rate freeze to SME loans in general, further distorts market conditions and calls into question the legal binding force of contracts concluded under private law. It is in the fundamental interest of banks to ensure that their customers, whether individuals or businesses, remain solvent, can meet their contractual obligations and evolve. Banks have always assisted customers in need of help in a targeted way, and continue to be partners in finding fair and proportionate solutions to this end. The interest rate freeze in its current form is neither proportionate nor targeted.
Such high levels of bank charges and the uncertainty caused by retroactive interference in contractual relations have now reached a critical level that can only result in a significant drop in retail and corporate lending. However, even in these difficult circumstances, we remain confident in the performance of the Hungarian economy and emphasise that only targeted measures represent an effective approach to supporting the economy, while the gradual phasing out of general instruments will help consumers and businesses adapt and operate under real market circumstances.
Budapest, 28 October 2022
Hungarian Banking Association