Patai: 2013 will be “catastrophic”.

Hungarian Bank Association President Mihalyi Patai stated at a conference yesterday that the bank sector is not able to contribute to the growth of the Hungarian economy because the “sphere struggling with problems of profitability” cannot increase the real volume of credit.

According to Patai the greatest obstacle to lending is the decrease in the import of liquidity.  The deposits of Germans and Austrians are no longer being used to underwrite loans in Hungary but to replace lost capital.  Patai warns that in the future the Hungarian banking sector will have to use domestic deposits to make loans.

Patai felt the Hungarian banking industry was in the middle of “seven lean years” and that 2013 would be “catastrophic”.

He acknowledged that the MNB credit program had a positive effect on economic growth but indicated that over time government programs of this nature and size can create problems.

Patai said that Hungary’s economic policies will succeed in changing the “bank status quo” as burdens on existing banks continue to grow.

Prime Minster Viktor Orban stated earlier that one of the objectives of his government is for at least 50 per cent of Hungarian banks to be majority-owned by Hungarians.

Patai said a number of large banks are in serious trouble.  According to figures released by the Hungarian financial regulatory authority this year CIB, MKB, Raiffeisen and Erste were in particularly bad shape having collectively lost some HUF 800 billion (USD 3.6 billion) between 2010 and 2012.

Referenced in this article:

Melyik bank vonul ki Magyarországról?, napi.hu, 7 November 2013

800 milliárdos veszteség négy magyar banknál – Itt a friss rangsor!, portfolio.hu, 17 September 2013