BUDAPEST: Hungary's central bank said on Monday the ability of local banks to withstand shocks was solid, adding however that weak lending to companies and the high stock of distressed retail mortgages continued to pose risks going forward.
"There is still a risk of a creditless recovery," the central bank said in its financial stability report. "Therefore, at present it is extremely important that banks and other institutions of the financial intermediary system be able to finance the economic upswing."
The central bank has announced it would expand its funding-for-growth scheme into 2016 and launched measures to support market-based lending as central Europe's most indebted nation heads for an economic slowdown next year.
The central bank said the capital and liquidity position of the local bank sector was "currently adequate" and for the first time since the start of the crisis all banks met the regulatory capital requirement even under a stress scenario.
It said the profitability of local banks could improve over the next two years but could still remain low overall.
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