Experiences with the Introduction of a Payment Moratorium in Hungary

The payment moratorium, which was introduced in the wake of the coronavirus pandemic in Hungary as well, has become an internationally widespread crisis management tool. In our study, we analyse the demographic and income characteristics of bank clients who have participated in the payment moratorium and the direct impact of the payment moratorium on the liquidity of debtors and on bank profitability. The analysis is based on transaction-level data available to the Magyar Nemzeti Bank (the Central Bank of Hungary, MNB) that is detailed in international comparison as well. Based on our examination, the payment moratorium has proven to be an effective tool for mitigating the short-term default risk of potentially vulnerable debtors. It has also provided significant additional liquidity at the level of the national economy to offset the negative impacts of the pandemic, while causing only moderate direct costs at the level of the banking system. On the whole, the payment moratorium can be considered an effective and efficient crisis management tool for exogenous economic shocks similar to the coronavirus pandemic, which is also confirmed by its international prevalence.