Hungary to Start Buying Bad Loans From Banks as EU Clears Plan

  • Asset manager to buy distressed commercial loans for 15 months
  • EU rules purchase at market prices doesn't amount to state aid

Hungary’s central bank will start buying non-performing commercial loans after the European Union approved the plan that’s intended to boost corporate lending.

The bank’s asset manager, known as Mark, will conduct the purchases at market prices over 15 months, the National Bank of Hungary said in a statement Wednesday.

The program is the latest in the bank’s efforts to revive corporate lending and stave off an expected economic slowdown. The asset manager, which will start operations with an initial capital of 300 billion forint ($1.1 billion), will manage and sell the assets related to commercial real estate over a 10-year period, the central bank said.

The plan will be "efficient in cleaning up entire banking portfolios over a short period of time," said Gergely Fabian, a director at the monetary authority.

All financial institutions will be invited to take part in the program on a voluntary basis, the central bank said. Mark will make a binding offer for suitable portfolios, not individual assets.

The plan doesn’t constitute state aid because the risk is assumed in return for proper compensation, the European Commission said in a statement.

Eligible non-performing commercial real estate loans amount to about 500 billion forint, central bank Deputy Governor Marton Nagy said. The central bank aims for Mark to shift toward market-based financing in the medium- to long-term, according to Nagy. The asset manager will start the program with a three-month registration period starting in early March, after conditions are announced in the second half of February.

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