Macroprudential Paradigm Shift in Hungarian Bank Regulation

Within the framework of the global macroprudential paradigm shift, which directs regulators’ attention on systemic risks, governments that had to intervene during the financial crisis to maintain financial stability now require banks to comply with more and stricter rules. The new paradigm significantly increases the powers of state institutions over the banking industry. This article analyses the distinctive aspects of the international paradigm shift in bank regulation as observed in Hungary in light of the changes in bank regulation and the institutional framework of bank supervision between 2008 and 2013. Its main findings are as follows: (1) the 2008 agreement between the Hungarian government and the IMF played an important role in the paradigm shift, (2) regulations enacted within the framework of the new paradigm strengthened Hungarian state institutions vis-à-vis the banking sector, (3) the opposition of the banks to the changes in Hungary is attributable to the inherent quality of the new paradigm: it raises the cost of banking. The analysis does not provide a conclusive answer to the theoretical question of whether the banking sector gains in stability with the implementation of the macroprudential paradigm.* Journal of Economic Literature (JEL) code: G 280, G 010, F 590.