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4.17 Off-balance sheet liabilities and other significant off-balance sheet items of the MNB
HUF millions
No. Description 31 Dec 2019
Receivables Liabilities Net market value 31 Dec 2020
Receivables Liabilities Net market value
1. Interest rate swap transactions 3,122,223 3,122,223 56,719 2,639,105 2,639,105 69,792 - IRS facility of monetary policy (MIRS) 1,099,617 1,099,617 22,390 1,099,617 1,099,617 21,263 - IRS contracted with domestic credit institutions 919,910 919,910 26,941 358,830 358,830 13,432 2. Futures 3. FX swap, FX futures and forward transactions 97,236 16,969 -342 109,331 22,263 -3
7,116,887 7,122,273 -5,327 8,669,557 8,617,794 48,031
- Forint liquidity providing FX swaps 2,499,053 2,503,358 -9,944 1,622,161 1,658,420 -47,508 - EUR liquidity providing FX swaps 0 0 0 1,098,676 1,089,970 8,927 4. Currency swap transactions (including transactions without capital replacement) 4,299,412 4,567,579 -343,523 3,372,710 3,544,754 -217,374 - Currency swap transactions linked to FGS 137,649 129,825 11,824 129,511 110,636 22,271
5. Total hedging transaction (1+2+3+4) 14,635,758 14,829,044 -292,473 14,790,703 14,823,916 -99,554
6. Options 999 1,001 1 0 0 0 7. TBA transactions 72,117 44,995 61 191,077 41,863 705 8. Futures
9. Total derivative transactions for purposes other than hedging (6+7+8) 10. Total (5+9)
260,972 0 -599 94,084 0 -13
334,088 45,996 -537 285,161 41,863 692
14,969,846 14,875,040 -293,010 15,075,864 14,865,779 -98,862
The above table includes all types of off-balance sheet receivables and liabilities arising from derivative transactions; it also includes FX swaps, currency swaps, FX futures and forward transactions for hedging purposes, which are part of the foreign currency position and are recorded in the balance sheet, except for currency swaps without capital movement. Hedging transactions reduce risks related to the net foreign currency position arising from cross-rate fluctuations and from interest rate changes and support the creation of the benchmark foreign currency structure.
Nearly one half of the interest rate swap transactions are transactions with foreign partners for hedging purposes linked to specific bond issuance, which are concluded with the aim of achieving the interest structure deemed desirable by the MNB. The tenders of the monetary policy interest rate swaps (MIRS) launched early 2018 were terminated at the end of the same year, the balance at end-2019 remained unchanged at end-2020. Since 2014, related to the self-financing programme, the MNB has concluded interest rate swap transactions with domestic credit institutions to reduce their interest rate risk. The balance of such swaps decreased due to maturities.
The aim of bond futures transactions is to reduce the duration of the reserve portfolios; these are hedging transactions maturing within 1 year.
FX swap, FX futures and forward transactions are primarily the main instruments for hedging foreign exchange risk, based on expectations related to foreign exchange rate changes; their aim is to achieve the targeted foreign currency position, and their maturity is less than 1 year. Fine-tuning FX swap transactions (forint liquidity providing FX swaps) and EUR liquidity providing FX swaps are for monetary policy purposes; the MNB provides their tenders on an ad hoc basis, depending on liquidity for domestic credit institutions.
Currency swap transactions are used to manage foreign exchange and interest rate risks jointly over the long term. Of the end-2020 balance, 22 per cent of the currency swap transactions consisted of transactions without capital replacement maturing in 2023, and the EUR/HUF swaps linked to FGS refinancing loans amounted to 3 per cent.
The derivative transactions for purposes other than hedging have a maturity within 1 year. The maturity of hedging transactions is presented in the following table.
Liabilities from derivative transactions by remaining maturity
Remaining maturity
- within 1 year - within 1 to 5 years - over 5 years
Liabilities from hedging transactions
HUF millions
Balance
31 Dec 2019 31 Dec 2020 Change
8,342,302 9,864,128 1,521,826 5,081,844 3,676,762 -1,405,082 1,404,898 1,283,026 -121,872 14,829,044 14,823,916 -5,128
Other off-balance sheet liabilities
Description
FGS credit facilities Credit facilities to subsidiaries FGS+ related contingent liabilities Litigation-related contingent liabilities Guarantees Other off-balance sheet liabilities
Total
HUF millions
Balance
31 Dec 2019 31 Dec 2020 Change
53,190 301,685 248,495 0 1,031 1,031
133 133 0
357
1,563 1,806 1,822 11 11
1,206 16 0
55,497 306,245 250,748
The contracts concluded but not yet disbursed in the framework of FSG fix and FSG Go! are reported as off-balance sheet liabilities, as credit facilities.
Credit facilities to subsidiaries include the funds still available from the contracted amount for employee housing loans of Pénzjegynyomda (Hungarian Banknote Printing Plc.) and Pénzverő (Hungarian Mint Plc.).
In accordance with the contracts concluded in the framework of FGS+, up to a maximum of 50 per cent of the capital loss of credit institutions arising from SME loans are reimbursed by the MNB to the credit institutions subject to a portfoliolevel limit. FGS+ related contingent liabilities are used to record the expected reimbursement for which provisions have been made, in line with the rules of qualification.
The majority of the legal proceedings are proceedings against penalty resolutions connected to supervisory activities and include indemnity cases. The related contingent liabilities are used to record paid but litigated penalties and other expected compensations connected to legal proceedings for which provisions have been made.
The item ‘Guarantees’ consists of export guarantees, to which an irrevocable indemnity bond is always linked. When exercising a guarantee, the MNB has the right to a reverse guarantee if needed. In 2020, the increase in the balance was caused by exchange rate changes.
