The economic crisis has delivered Hungary's banks a sharp shock. But, unlike former prime minister Ferenc Gyurcsány, deposed in April 2009 for his handling of the crisis, the banks look capable of bouncing back. The National Bank of Hungary, which has just produced its report on Hungary's financial stability, says that the banks "should have adequate capital to absorb losses from the economic downturn". It also takes comfort from capital adequacy ratios of about 11%.
The other side of the equation is a slowdown in lending and a deterioration in the quality of the loan portfolio, together with a sharp weakening of the exchange rate. The central bank expects profitability to decrease sharply and capital adequacy to take a hit.
