The European Bank for Reconstruction and Development (EBRD) would consider participating in merger and acquisition transactions that support banking consolidation in Hungary, according to international institution's new country strategy published on April 11.
According to the announcement, if Hungary implements its commitments detailed in the banking "peace deal" announced in February 2015, the bank would support reforms in the country through investments, aiming to contribute to sustainable economic growth.
The EBRD points out, however, that full implementation of the deal, including the government’s committment to creating a predictable and business-firendly tax and policy environment for the banking sector, "will be critical”. In particular, the EBRD says it wants to see the bank tax reduced further. Hungary dropped the levy at the start of this year, with banks having complained furiously over the tax over the past few years.
The EBRD will aim to strengthen banking sector resilience and its capacity to lend, the strategy says. The international institution will help Hungarian banks stabilize liquidity by providing direct long-term funding through bond issuance and mortgage-backed lending. It will also “seek opportunities to finance distressed assets across sectors to assist with NPL (non-performing loans) resolution and freeing up banks’ capacity for new lending”.
In February 2015, EBRD and Hungary agreed to each buy 15% in Erste's Hungarian unit as Budapest pledged to ease pressure on the banking sector. The acquisitions - seen as the final seal on the banking peace deal - have yet to materialise, but the EBRD has recently said it has the deal under final review.
Under the original plan, the stake' were meant to change hands by June 2015. On April 10, Radovan Jelasic - CEO of Erste's Hungarian unit - said the EBRD could close the deal by June this year.
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