Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/322334 
Year of Publication: 
2025
Series/Report no.: 
MNB Working Papers No. 2025/2
Publisher: 
Magyar Nemzeti Bank, Budapest
Abstract: 
This study evaluates the credit risk of sustainable loans in a preferential capital requirement programme. We utilise loanlevel data from a uniquely implemented programme from Hungary, applying logistic regressions and survival analysis techniques. We observe a significantly reduced credit risk for firms with renewable energy and electromobility loans, even after accounting for all relevant covariates. Models incorporating green characteristics predict a substantially lower credit risk for firms with green loans compared to models excluding green characteristics. These results are economically significant and robust to model specifications, alternative definitions of green firms and varying default definitions. We show that green loans' lower probability of default can justify a reduction of several percentage points in capital requirements.
Subjects: 
sustainable finance
financial stability
capital requirement
green finance
default probability
green transition
central bank mandates
JEL: 
E58
G21
G33
O16
Document Type: 
Working Paper

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