National Bank of Hungary aligns credit risk recommendation with broader ESG guidance

On 1 October 2026, Recommendation No. 11/2026 (IX.28.) of the National Bank of Hungary (MNB) on the assumption, measurement, management and control of credit risk went into effect, replacing Recommendation No. 7/2024 (VI.21.) on the subject. On environmental, social and governance (ESG) matters, the Recommendation aligns the general credit risk framework with the MNB’s broader ESG guidance, including its existing ESG risk-management and questionnaire recommendations. The update reinforces and consolidates supervisory expectations rather than creating a new set of ESG obligations.

Scope

The Recommendation applies to financial organisations with their registered seat in Hungary that assume credit risk and fall within the scope of the relevant sectoral laws, and to Hungarian branches of financial organisations seated outside the European Economic Area. Organisations apply it based on the principle of proportionality, according to their business model, activities, risk profile and credit risk exposure. As with other MNB recommendations, the Recommendation is not legally binding but sets out the MNB’s supervisory expectations. Its broad scope includes insurers and pension funds in respect of their credit risk exposures, without making bank-specific lending requirements universally applicable.

From climate risk to a broader ESG approach

The Recommendation reflects a broader ESG risk approach, covering social and governance risks alongside climate and environmental risks, and links credit risk management to two related MNB instruments. Financial organisations are expected to take into account Recommendation No. 2/2026 (III.6.) on the management of environmental, social and governance risks and the integration of environmental sustainability considerations in credit institution activities (the ESG Recommendation). They are also expected to consider the related Recommendation No. 7/2025 (VI.23.) on the application of a minimum questionnaire for assessing environmental, social and corporate governance information (the ESG Questionnaire Recommendation). These cross-references align the general credit risk framework with the MNB’s existing ESG guidance.

These references cover the assumption, measurement, management and control of credit risk. They must be read along with the scope and application conditions of the respective ESG recommendations. They do not, however, make every bank-specific requirement or ESG questionnaire applicable to every financial organisation or transaction. The Recommendation also expressly expects that ESG risks be reflected in credit risk policies and procedures, including at operational levels. For credit institutions, this approach is already addressed in the separate ESG Recommendation. Its inclusion there aligns the two supervisory instruments.

What this means

The Recommendation gives banks and other financial organisations an opportunity to check that their credit risk frameworks reflect the MNB’s broader ESG guidance. Institutions should review their credit risk policies, at both the entity and group level, where applicable, to ensure that their social and governance risks are addressed alongside climate and environmental risks. Where gaps are identified, they should update their internal rules and operational procedures so that these considerations are reflected throughout the credit risk-taking and management process, not only in the policy document. Where applicable, financial organisations should also consider how the minimum ESG questionnaire under the ESG Questionnaire Recommendation feeds into their client assessment, taking account of the recommendation’s scope, borrower definitions, transaction thresholds and phased application dates.

What happens next

The MNB expects financial organisations to apply the Recommendation. Institutions should assess its ESG-related expectations against their existing arrangements and address any gaps vis-à-vis their activities and risk profile. The separately referenced ESG recommendations retain their own application schedules. The MNB monitors and evaluates adherence as part of its supervisory activities.

For more information on the Recommendation and how its ESG expectations affect your credit risk framework in Hungary, contact your CMS client partner or the CMS experts who contributed to this article.

The article was co-authored by Luca Pintér and Máté Mondok.