December 4, 2019 / 2:19 PM / 3 months ago

Hungary's central bank warns lenders which fail to embrace change will close

BUDAPEST, Dec 4 (Reuters) - Some banks in Hungary may be forced out of the market as they are ill-prepared to meet challenges from financial technology companies and pressure on revenues from a persistently low yield environment, the central bank said on Wednesday.

“As FinTech firms gain ground, competition in the market of financial services is also becoming increasingly intensive,” the bank’s Financial Stability Council said.

Lenders that postpone the introduction of mobile banking and the rationalisation of the branch network for example will be “unable to meet the profitability expected from them, and they may be forced out of the market over the medium term,” it said.

The central bank, which has warned there were too many large banks in Hungary, did not name any lenders in particular.

The National Bank of Hungary (NBH), which is in charge of financial sector regulation, said the banking sector as a whole was resilient and would meet regulatory capital requirements even after a major negative macroeconomic shock.

But the fintech challenge compounds uncertain profitability.

It said the still-favourable economic environment and high bank sector profitability, bolstered by the reversal of loan loss provisions and a lending boom, provided an appropriate environment for lenders to make the necessary adjustments.

Major players in the Hungarian banking market include domestic OTP Bank, Austrian rivals Erste Bank and Raiffeisen, Italian UniCredit and Intesa SanPaolo and Belgian KBC.

The central bank, which held interest rates unchanged near record lows last month, expects economic growth to slow to 3.3% next year from the 4.5% seen in 2019, according to its latest quarterly inflation report.

The bank will publish new forecasts at its upcoming policy meeting due on Dec. 17. (Reporting by Gergely Szakacs Editing by Alexandra Hudson)

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