Hungary Banks’ Credit Capacity Drops to 2008 Level, Says the Magyar Nemzeti Bank - by Edith Balazs

Hungarian banks’ lending capacity fell in the fourth quarter to a level last seen in September 2008, when the financial crisis engulfed the country, because of tighter and more expensive funding, the central bank said.

“The deterioration in lending capacity was last reported by such a proportion of banks upon the outbreak of the September 2008 crisis,” the Magyar Nemzeti Bank said in a survey published today in Budapest. The drop in lending capacity is driven by shrinking external funding and rising foreign-currency funding costs, it said.

Hungary’s banking industry turned unprofitable for the first time in 13 years in 2011 because of losses from foreign- currency mortgage repayments, rising bad loan provisions and a special industry tax. Regional competition for external funding is becoming more difficult for the Hungarian banks, the central bank said.

For more: Hungary Banks’ Credit Capacity Drops to 2008 Level, MNB Says - Bloomberg