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State aid: Commission approves Hungarian liquidity support scheme

European Commission - IP/10/19   14/01/2010

Other available languages: FR DE HU

IP/10/19

Brussels, 14 th January 2010

State aid: Commission approves Hungarian liquidity support scheme

The European Commission has approved under EU state aid rules a Hungarian measure aimed at providing liquidity to eligible financial institutions in Hungary to support lending to the economy. The Commission is satisfied that the measure is compatible with Article 107(3)(b) of the Treaty on the Functioning of the European Union (TFEU). In particular, the measure is appropriate, necessary and proportional to support the Hungarian financial system against the exceptional turbulence encountered by Hungarian banks in the midst of the global financial crisis, while limiting distortions of competition.

Competition Commissioner Neelie Kroes said: "Despite its late notification, I am satisfied that the Hungarian liquidity support scheme has been instrumental in helping financial institutions withstand the exceptional turbulence on the financial markets without unduly distorting competition."

In late 2008 to early 2009, the Hungarian financial markets and economy were particularly affected by the global financial crisis. Liquidity sources completely dried out for both financial institutions and the Hungarian State itself, leaving the State with limited financing options and having to resort to external support in the form of a financing package provided jointly by the IMF, the European Union and the World Bank in November 2008.

In this context, in March 2009 Hungary enacted a liquidity scheme aimed at providing loans to Hungarian financial institutions to enable them to maintain lending to the real economy in spite of the severe liquidity shortage. The liquidity support takes the form of non-subordinated, non-structured loans, with a maximum maturity and an entry window open until 30 June 2010. To date, three Hungarian banks have benefited from the liquidity scheme since its implementation in March 2009.

The Commission has found that the liquidity loans are compatible with the provision article 107(3)(b) of the TFEU and in line with its Banking Communication (see IP/08/1495 ). In particular, the loans address acute liquidity problems of Hungarian financial institutions. The liquidity measures were necessary, in light of the exceptional turbulence that the Hungarian economy and financial institutions experienced, to avoid even greater disturbance to the economy. In the context of the IMF sponsored external financing package received by the Hungarian State, the remuneration, which covers the cost of funds of the State and the risk premium of the institutions, can be considered appropriate. In particular, the level of remuneration of the loans is consistent with the pricing of the Hungarian guarantee scheme (see IP/09/253 ).

The non-confidential version of the decision will be made available under the case numbers NN 68/2009 in the State Aid Register on the DG Competition website once any confidentiality issues are resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News .


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