BUDAPEST: The vehicle set up by the National Bank of Hungary to buy up bad loans from banks will start purchasing assets after publishing the terms and conditions of the scheme later this month, the central bank said, after the plan was approved by European regulators.
The vehicle, called MARK, is part of ongoing efforts by central bank Governor Gyorgy Matolcsy, an ally of Prime Minister Viktor Orban, to revive lending to companies and support economic recovery.
After more than a year of wrangling over the nuts and bolts of the programme, the European Commission on Wednesday gave the green light to MARK to buy distressed corporate loan portfolios, mostly commercial real estate, from local banks.
"One of our colleagues had carried a child to birth" in the time it took to win regulatory approval for the vehicle, MARK Chief Executive Officer Csaba Kandracs told a news conference.
The child was named "Mark," he added. Kandracs said the body, launched by the central bank with an initial budget of 300 billion forints ($1.08 billion), aimed to spend all of that capital to take over the bad corporate loans that have weighed on their bank books for years.
"The past seven years, effectively nothing happened in this market (in terms of cleaning out bad portfolios), which justifies the need for intervention," central bank director Gergely Fabian said. The bank said participation in the scheme will be voluntary, but MARK will commit to buying all eligible portfolios with binding offers in a 15-month process, open to all solvent domestic lenders.
The plans call for MARK to exist for 10 years. Kandracs said MARK would bid for complete portfolios, not individual assets, from each bank taking part in the programme.
"Their decision will be simplified because they either sell us the whole lot, or nothing," he said.
MARK will then try to sell off the assets, such as offices, hotels, shopping centres, land plots or warehouses.
The process could be helped by regulation that will require Hungarian commercial banks to set up "systemic risk buffers" on problem project loans by Jan. 1, 2017.
MARK's operations will rely on the central bank in the beginning and gradually transform into an entirely market-based operation.
"MARK's programme is expected to considerably speed up the clean-up for bank balance sheets, thereby strengthening the stability of financial institutions as well as their ability and willingness to lend," the central bank said.
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