* Central bank highlights corporate bad loans
* Seeks faster clean-up of bad loan portfolios
* Clean-up could attract new buyers for some banks -Governor
* Bank to tighten rules on household lending
* Latest interventions into bank sector
(Adds central bank governor's comments)
By Krisztina Than and Gergely Szakacs
BUDAPEST/LONDON, May 22 Hungary's central bank
proposed regulatory action on Thursday to encourage commercial
banks to clean bad corporate loans from their books, a move
which could improve their ability to lend and accelerate a
shake-up of the sector.
In the latest intervention by Hungarian authorities in the
local banking system, the bank also announced plans to impose
stricter rules this year on household loans, to stop credit
growing unhealthily fast as an economic recovery gathers pace.
The central bank has said the banking sector needs a
shake-up that could result in several foreign banks leaving, and
would make the sector more competitive.
Speaking in London, Governor Gyorgy Matolcsy, a close ally
of Prime Minister Viktor Orban, said the clean-up of bad loans
may attract buyers for some banks in the country.
Matolcsy also told reporters that there were some initial
talks with lenders about the idea of them placing non-performing
loans in a so-called "bad bank".
"Clearing out the loan portfolios may result in promising
new buyers for some of these banks," Matolcsy said. He also said
a "new consolidation" was needed in the sector.
He did not name any but said a couple of foreign-owned
lenders have sent signals they might leave Hungary.
"I do not mean the banks I mean the owners, the banks will
stay here in Hungary. A sort of restructuring will happen to
the Hungarian banking system in two years' time."
The clean-up could accelerate a shake-up of the bank sector,
which is dominated by foreign names such as Austria's Erste
and Raiffeisen, Italy's Intesa Sanpaolo
and UniCredit, Belgian KBC, or
German MKB. The top lender is Hungary's OTP Bank.
Matolcsy said the idea of a bad bank emerged to help lenders
dragged down by sour loans and enhance stability.
"It will help them and it will help the National Bank of
Hungary. For their part they need it to clear out the NPL
(non-performing loans) part of their loan portfolios and for us
we need it ... for financial stability."
Orban's government has repeatedly said it wants to see over
50 percent of the country's banks in Hungarian hands. At the
moment, Hungarian ownership is at around 40 percent based on
The central bank has already tightened funding rules and
announced measures to push commercial banks to buy more
local-currency government debt in an attempt to reduce the
country's high reliance on foreign financing.
LEVIES AND INCENTIVES
Hungary's banks pay one of Europe's highest bank levies, and
were forced to swallow heavy losses on a previous government
measure in 2011 to help troubled foreign currency borrowers.
The central bank said earlier on Thursday that banks were
still not adequately supporting economic growth.
This is partly due to a high stock of non-performing
corporate loans on banks' books, the central bank said in its
latest financial stability report. It said banks needed to
tackle the problem soon to fend off risks to financial stability
and to encourage new lending.
In a presentation the central bank highlighted five banks,
without naming any, whose profits and corporate loan stocks have
fallen over the past four years. The regulator also said weak
profitability posed risks to economic growth.
It suggested possible "positive and negative incentives" to
speed up the cleansing of loan books.
"For banks, a negative incentive would be the introduction
of stricter loan-loss provisioning obligations," the bank said
in its report.
Balazs Vonnak, a director of the bank, told a news
conference that the bank was considering several solutions and
would table proposals within a few months.
"This is entirely independent of the consolidation of the
banking sector," Vonnak said.
The bank said 18 percent of loans were non-performing at the
end of 2013 in the corporate segment, while bad loans in the
household portfolio rose to 18.6 percent.
The bank also said its Financial Stability Council has
approved a plan to impose an upper limit on payment-to-income
ratios on household loans, which should take effect this year.
It did not say what the limit would be.
So far, all the main players have said they intend to stay
in Hungary except for German BayernLB which has to
sell its Hungarian unit MKB due to an order from the European
Commission to restructure its operations.
(Additional reporting by Carolyn Cohn and Sujata Rao in LONDON;
Editing by Ruth Pitchford and Susan Fenton)