Hungarian Covered Bonds - Hungary

1	What type of assets may be included in the cover pool?
	Primary assets Substitution assets Public sector assets Mortgage assets Other 1* Other 2* Other 3*   Exposures to credit institutions x Residential mortgage loans x Commercial mortgage loans x Derivatives x Bonds from: government, government guaranteed, supranational, other issuers x Special part of the grant mortgage loan secured by gvt guarantee according to mortgage bank act x For further information please see the comments section at the end of the questionnaire.
2	What is the geographical scope of assets?
	Primary assets Substitution assets Public sector assets Mortgage assets Other 1* Other 2* Other 3*   Domestic x x Multilateral development banks x EU x x EEA x x OECD x
3	Is there a maximum level for substitute assets in the statutory national framework?	Yes, please specifiy The share of substitute assets may in no case be more than 20% of all mortgage bonds with remaining maturity of more than 180 days
4	Are there any reporting requirements for covered bond issuers to investors?	Yes, by law and in line with art. 14 of EU Covered Bond Directive
5	What is the frequency of reporting to investors?	Quarterly

1	What is the basis for property valuation	Mortgage lending value
2	Is a regular update of the property value required?	Yes, new external physical apraisal within a specific time span Yes, automated / indexed valuation sufficient Physical apparaisal, statistical method including automated appraisal are allowed by law.
3	What are the LTV limits (single asset based)? Please specify in %/n.a.	Residential Commercial Residential 70%; Commercial 60%
4	Are loans in excess of LTV limits eligible for inclusion in the cover pool?	No (hard limit)

IV.1 Derivative contracts in the cover pool

1	Are derivative contracts eligible for the inclusion in the cover pool?	Yes, exclusively for hedging purposes (by law) Restrictions on termination are applied by the law.
2	Are there requirements for derivative contracts (e.g. eligibility criteria for hedging counterparties)?	Yes, specified in law Mortgage loan companies permitted to engage in derivative transactions for reasons of liquidity, risk management operations, only for hedging purposes
3	Will derivative contracts remain in case of insolvency of the issuer?	Yes Mortgage loan company undergoes liquidation: liabilities of derivative instruments (collateral security) not deemed payable at opening of proceedings.
4	If derivatives are permitted in the cover pool, what is their ranking?	Pari passu to covered bond holders

IV.2 Exposure to market risk

1	What is the primary method for the mitigation of market risk?	Natural' matching (i.e. match funding, matching without the use of off-balance sheet instruments) and stress testing Use of derivative hedging instruments
2	Are there mitigating provisions for interest rate risk?	Yes, by legislation/regulation The provisions related to mitigating interest rate risk can be found in the Act CLXII of 2009 on Consumer Credit
3	Are there mitigating provisions for foreign exchange risk?	Yes, by legislation/regulation
4	Are there mitigating provisions for maturity mismatch risk?	Yes, by legislation/regulation Mortgage Funding Adequacy Ratio-20/2021. IV.23) Hungarian National Bank Decree-regulation
5	What type of coverage test is applied?	Nominal cover Present value cover
6	Are there stress scenarios applied?	Yes, by law

IV.3 Liquidity risk

1	Is exposure to liquidity risk mitigated?	Yes, by law
2	What liquidity risk mitigation requirements are in place (principal)?	180 days liquidity provisions Maturity extension provisions From July 08, 2022 in accordance with EU directive implementation
3	What liquidity risk mitigation requirements are in place (interest)?	180 days liquidity provisions Maturity extension provisions
4	What is the consequence of not fixing a breach of liquidity risk mitigants?	Administrative penalty From July 08, 2022 in accordance with EU Covered Bond (2019/2162) directive implementation
5	If 180 days liquidity provisions are in place, what types of liquid assets are eligible	LCR Level 1 LCR Level 2a LCR Level 2b Short term exposures to credit institutions (Credit Quality Step (CQS) 1) Short term exposures to credit institutions (CQS 2) Short term deposits to credit institutions (CQS 1) Short term deposits to credit institutions (CQS 2) Short term deposits to credit institutions (CQS 3) From July 08, 2022 in accordance with EU Covered Bond (2019/2162) directive implementation
6	If 180 days liquidity provisions are in place, the calculation of principal is based on:	The expected maturity date

IV.4. Maturity extension

1	Is maturity extension allowed by national law?	Yes, but optional and subject to conditions From July 08, 2022. The maturity extension is subject to objective triggers specified by the issuer in advance in the Final Terms.
2	Is it possible to issue…	Hard bullet Soft bullet Soft bullet is an option from July 8, 2022. Soft bullet issuance is based on the issue program definition.
3	Which trigger plays a role for maturity extension according to law - independent or alone or in combination?	From July 8, 2022. Triggers have to be based on objective factors that comply with legal requirements and to be defined in the Final Terms.
4	Does any competent authority need to give its okay (or non-opposition)?	Yes Magyar Nemzeti Bank, the competent financial authority, controls and gives consent to the Issue Programmes, including pillars of Final Terms.

IV.5 Overcollateralisation

1

Is mandatory overcollateralisation required in the law ?

mortgage bond - 2% - nominal/NPV

V.1 Cover pool monitor (CPM)

1	Is there a cover pool monitor in addition to national competent authorities in the statutory law?	Yes, by law and in line with Article 13 of EU Covered Bond Directive
2	Is the CPM separate from the issuing credit institution?	Yes, required by national statutory law
3	Is the appointment, dismissal, eligibility criteria and the role of the CPM regulated by the national statutory law?	Yes

V.2 Banking supervision

1	Which are the national competent authorities designated to carry out covered bonds public supervision in the law?	Magyar Nemzeti Bank - Website
2	Is a special permission required for a covered bond programme according to national law?	Yes, licence for institution + competent autority
3	Is there a covered bond issuance limit in law or regulation? If yes, please specify	No
4	Does the national statutory law provide for the appointment of a dedicated cover pool administrator in case of insolvency/resolution (transfer included acc. to BRRD [Bank Recovery and Resolution Directive])?	Yes
5	Which is the typical frequency in the national statutory law of reporting from the covered bond issuers to the designated competent authorities?	Quarterly

1	Does the national statutory law meet the requirements laid down in the EU Covered Bond Directive?	Yes
2	Does the statutory law meet the requirements of Article 129 of CRR [Capital Requirement Regulation]? In this case, please specify the collateral types meeting the Art. 129 CRR.	Yes Loans secured by residential property and loans secured by commercial loans in accordance with CRR 129 (d) (f)
3	Does the statutory law allow covered bonds out of the scope of Art 129 of CRR? In this case, please specify the collateral	No
4	Are listed covered bonds eligible in repo transactions with the national central bank?	Yes

Primary Legislation

• HungarianCoveredBondAct (HU).pdf (Original language)
• HungarianCoveredBondAct (EN).pdf (English language)

Hypostat

• Hungary.pdf (English language)

Fact Book

• 3.19 Hungary.pdf (English language)

Intro CB Video

Any further comments/information?

General comment: The Hungarian legislation also applies the Joint funding regulation under Article 9 of the Directive. The collateral may also be transferred through a financial collateral agreement under Directive 2022/47/EC. Comment on Section II.1: "1) Repurchase price of independent mortgage lien considered Exposures to credit institutions under pooling scheme 2) Substitute assets can be government or supranation bonds defined by law, other issuers mortgage or government guaranteed bonds 3) Part of grant mortgage loan secured by government guarantee in accordance with mortgage bank act"