EBRD supports Hungary in implementing corporate out-of-court restructuring guidelines

By Olga Rosca
@olgarosca

EBRD supports Hungary in implementing corporate out-of-court restructuring guidelines

Bank organises practical workshop to foster adoption of the new guidelines

Following the official issuance by the Hungarian Central Bank (MNB) of its recommendation on the out-of-court restructuring (OOCR Recommendation) of non-performing loans (NPLs), the EBRD organised, in partnership with the MNB, an industry workshop on the topic.

The MNB is working to ensure that the guidelines are implemented by all financial institutions under its supervision and welcomed the progress made by banks in this regard.

On behalf of the EBRD, Graeme Hutchison, the Bank’s Regional Head of Hungary and Slovakia, added: “With the new OOCR Recommendation, we have a guideline which the industry will find beneficial and will use as a tool to facilitate out-of-court restructuring between multiple creditors. This will allow for a better alignment of interests and ultimately improve the overall recoverability of distressed exposures. The successful implementation of the Recommendation will require the support of all of its ultimate beneficiaries.”

The manual was first drafted by the MNB in cooperation with the EBRD and discussed in consultation with the Hungarian Banking Association and representatives of the banking sector. The law firm Lakatos Köves and Partners assisted with the preparation of the draft, based on a report by the financial consultants EY.

The Recommendation is technically non-binding but intended to have significant powers of persuasion and to be an important tool for NPL resolution. Its implementation is expected to lead to greater cooperation and coordination of banks on corporate restructuring, but also on consensual settlement and enforcement of security out of court.

The event, held under the Vienna Initiative, brought together leading banking groups, international investors, financial and legal advisers. The workshop provided the industry with applied and dynamic training on the OOCR Recommendation, using practical case studies and expert panel discussions.

The workshop is the continuation of a fruitful collaboration initiated over two years ago between the MNB and the EBRD to address the NPL challenge in Hungary. Hungary has taken positive steps to reduce its stock of bad debt, with the NPL ratio recording a significant drop to 5.4 per cent as of June 2017, according to IMF data (against 12.5 per cent two years earlier).

The EBRD has been at the forefront of supporting authorities, regulators and lenders in the countries where it invests to address the problem of bad loans. The Bank leads the NPL work of the Vienna Initiative, which is a framework for safeguarding the financial stability of emerging Europe.