In connection with the central bank liquidity providing operations the basic requirement is that credit can be given only against appropriate collateral. The collateral should be placed both for monetary policy liquidity providing operations and for intraday (daylight) credit in the Hungarian real time gross settlement system (the VIBER) and in the Interbank Clearing System (the BKR). However, the appropriate risk management supposes not only collateral but also effective risk control measures: properly-set haircuts, initial margins and adequate trigger point levels.
The current Colletaral Management System has three main characteristics: pooling, daily revaluation and (if it is necessary) realisation of collateral. The MNB applies a pooling system which means that the counterparties provide a set of eligible assets to serve as collateral in their credit operations (intraday credit also) with the central bank. The underlying assets and the outstanding credits are revalued every day in the evening, after end-of-day processing. With marking to market the counterparty can get more credit for the same amount (par value) of collateral. In the case of the counterparty’s inability to pay, the appropriate amount of collateral is going to be withdrawn from the deposited portfolio.
The haircuts are reviewed every year by the MNB. The MNB’s calculation for the value of the collateral is based either on the stock exchange data of the previous day (quoted securities) or on the yield curve estimation of the MNB (non-quoted securities). Furthermore, the MNB publishes daily price data (the market or internally estimated price lessened by the haircut in the percentage of the par value) by which the re-valuation of the eligible assets is effected at the end of the day.
The eligible assets are placed for the MNB as collateral with the Hungarian central securities depository and security settlement system (KELER Zrt.).
Business terms and conditions of bank accounts managed by the Magyar Nemzeti Bank and settlements in forint and foreign exchange