Hungary's financial sector stable, risks persist - Pszaf.

By bne IntelliNews June 23, 2011
Hungary's financial sector is stable, but the negative effects of the global financial crisis are not over yet, and still provide risks for its development, MTI news agency quoted the latest release of the biannual analysis prepared by the state financial watchdog (Pszaf). The biggest risk arises from the sovereign debt troubles in some European countries, which could affect Hungary through worsening of the economic and financial environment. At the same time, the worries on the domestic market come from the deterioration of the asset quality and low profitability in the financial sector, along with shrinking activity, the report explained. Pszaf expects that the stock of NPLs will continue to grow in the next months, although at a slower pace. The profitability in the banking sector in 2010 was substantially low and no significant recovery is expected in the current year, due to costs from bank taxes and risk premia. Despite the good liquidity position of the banks, the firms' unwillingness to risk results in weak demand for loans and constant decline in the loan stock, which is another risk for the sector, is also mentioned in the report. The watchdog commented the agreement between the government and the banks' association in support of troubled borrowers as a move that could push up lending and stabilise the market. Regarding the other participants in the financial sector, the watchdog noted that the situation of the savings co-operatives was more positive than not. Insurers were on the break-even point in 2010 and no substantial pick-up in profitability in 2011 could be expected.

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