On 3 August 2026, the Hungarian government published Government Decree 1239/2026 (VIII. 3.), directing the Minister of Finance and the Minister of Economic Affairs and Energy to conduct a comprehensive review of state guarantees linked to private-sector lending, especially guarantees underpinning the operations of the Hungarian Development Bank (MFB).
As a first step, the Decree requires that the aggregate ceiling on state counter-guarantees be reduced from HUF 12,800 billion to HUF 11,200 billion by 31 August 2026. Further instrument-by-instrument and year-on-year reductions must follow until Hungary's guarantee exposure, measured as a percentage of GDP, converges with the average of the EU member states. The aim is to lower the level of state risk-sharing, thereby strengthening the sustainability of the Hungarian budget and, in the longer term, improving Hungary's credit rating.
Role of state counter-guarantees
State counter-guarantees in Hungary have been funded from the central budget for the purpose of improving access to credit for private-sector borrowers. Where the state assumes a substantial share of the default risk, the participating banks benefit from materially lower regulatory capital requirements and reduced provisioning obligations, enabling them to extend credit on more favourable terms and at greater volumes. The HUF 1,600 billion reduction mandated by the Decree directly affects the capacity of banks to provide financing on such terms and, at least during the transitional period, may reduce their willingness or ability to originate new lending.
The approximately 12.5% contraction in the overall guarantee ceiling constrains the volume for newly structured loans, imposing tighter limits on future deal flow. Borrowers that have relied on state-backed guarantees to secure bank financing may find their access to credit restricted as the available guarantee capacity tightens. At the same time, a more selective guarantee framework is expected to redirect capacity toward enterprises with better positioned to service debt without ongoing state support.
Potential impact on existing state counter-guarantees
Given the magnitude of the required reduction and the compressed timeline for its implementation, the question arises whether it may become necessary to cancel state counter-guarantees that are already in place.
For guarantees established by individual government decrees, cancellation could be envisaged in the following cases:
- where the terms of the state guarantee expressly provide that it may be revoked; or
- where the state guarantee has been granted for an indefinite term, following the expiry of a three-year period.
The Decree identifies the gradual phase-out of "unnecessary" state guarantees as a distinct strategic objective. As a result, the termination of existing counter-guarantees would likely be directed at guarantees falling within this category.
If the cancellation of the state guarantee constitutes an event of default under the terms of the underlying financing arrangements, a restructuring of the affected facility or bond may become necessary.
For more information on this decree and financial reform in Hungary, contact your CMS client partner or the CMS experts who contributed to this article.
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The article was co-authored by Viktória Dorusak.
