MAGYAR NEMZETI BANK
In the subject of PSD2, in the extraordinary situation that evolved as a result of the pandemic, the MNB held various professional presentations and training courses as well as several consultations in cooperation with the Banking Association online as well.
3.6 FOREIGN EXCHANGE RESERVE MANAGEMENT The MNB’s international reserves increased by around EUR 5.3 billion in 2020, with holdings at the end of December 2020 amounting to EUR 33.7 billion. During the year, the level of foreign exchange reserves was raised by the ÁKK’s foreign currency bond issuances, inflows of EU transfers from the European Commission and the rise in deposits placed by domestic financial institutions. At the same time, disbursements by the state to repay debt, foreign exchange expenditures of the Treasury and the change in the central bank’s forint liquidity providing FX swap holdings mitigated the increase. For financing the euro liquidity providing swap tenders over year-end, the MNB used its framework agreements concluded with international organisations.
Purposes of holding reserves Similarly to other central banks, one of the key tasks of the MNB – as specified in the MNB Act – is to manage the country’s foreign exchange reserves. The MNB holds foreign exchange reserves for the purpose of fulfilling several functions: – to ensure the level of reserves expected by market participants (‘international collateral’), – to support the monetary and exchange rate policy (providing intervention capacity), – to provide foreign currency liquidity for the banking sector, – and to meet the state’s transaction-related foreign currency needs. In terms of transaction goals, servicing the management of government debt continued to be the most important objective in 2020. In addition, the continuous provision of foreign currency to cover the needs of budgetary institutions should also be mentioned. The transfers received from the European Union also flow through the MNB, and as in previous years, they boosted the foreign exchange reserves in 2020. The aforementioned transaction goals were met smoothly in 2020 as well.
52
ANNUAL REPORT • 2020
The MNB regularly reviews the desirable level of reserves and, if necessary, takes measures – within the permitted limits – to reach the adequate level. Throughout 2020, international reserves of the MNB exceeded the reserve indicators followed by the central bank and investors as well. Of these indicators, the MNB pays special attention to the Guidotti–Greenspan rule, on the basis of which the reserves considerably exceed the level of short-term external debt.
Reserve size The level of Hungary’s international reserves rose by nearly EUR 5.3 billion in 2020 and amounted to EUR 33.7 billion at the end of the year. New foreign currency bonds issued by the state had the largest reserve increasing impact in the period under review. In April, the Government Debt Management Agency (ÁKK) issued 6-year and 12-year government securities series with nominal values of EUR 1 billion each, followed by a 15-year green bond with a nominal value of EUR 1.5 billion in June, a Samurai bond series with a total nominal value of JPY 62.7 billion and maturities of 3, 5, 7 and 10 years in September, as well as 10-year and 30-year bond issues with nominal values of EUR 1.25 billion each in November. The EU transfers received from the European Commission in a net amount of EUR 4.3 billion and an increase of EUR 215 million in deposits placed by domestic financial institutions also contributed to the growth in the reserves. These items were partly offset by the bond redemptions with original nominal values of USD 2 billion in January and EUR 1 billion in February, the Panda bond maturity worth RMB 1 billion in July as well as by the bond buybacks amounting to nearly USD 1 billion that took place in January and the foreign exchange expenditures of the Hungarian State Treasury. The increase was further mitigated by the flows related to the FX pillar of the third phase of the Funding for Growth Scheme and by the change in a total value of EUR 2.3 billion in the central bank’s forint liquidity providing FX swap holdings. For financing the euro liquidity providing swap tenders announced in the second half of the year, the MNB used its framework agreements concluded with international organisations.
