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Document Type

Case Study

Abstract

Hungary saw a surge in commercial real estate (CRE) lending prior to the Global Financial Crisis. By 2014, the banking sector was saddled with a high ratio of nonperforming CRE loans and repossessed property, though Hungarian banks remained solvent with high capital adequacy ratios. The central bank of Hungary, the MNB, announced the creation of an asset management company, Magyar Reorganizációs és Követeléskezelő Zrt. (MARK), to purchase nonperforming CRE assets from Hungarian banks on a voluntary basis, to clear their balance sheets and allow for increased lending. MARK was fully-owned by the MNB, which provided MARK’s share capital and a bridge loan of HUF 300 billion (USD 1.2 billion). MARK planned to purchase eligible assets at market price with the goal to purchase HUF 300 billion in assets at market value, or an estimated HUF 800 billion in book value. MARK launched on March 21, 2016, after receiving European Commission approval, and 23 financial institutions expressed interest in participating by June 2016. However, the MNB’s funding of MARK violated the European Central Bank’s monetary financing prohibition, which led the MNB to sell MARK to a private investment company in April 2017. The sale of MARK was finalized in June 2017.

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