While at the European level it is becoming increasingly clear that the management of ESG risks is becoming a fundamental element of banking operations, in Hungary the expectations that will enforce this in practice are also becoming more concrete.

MNB Recommendation 2/2026 (III.6.) and the related amendments to the Credit Institutions Act (Hpt.) represent this step change: ESG considerations are now directly linked to prudential operations, risk management and capital adequacy processes.

• MNB Recommendation 2/2026 (III.6.) and the amendments to the Hpt. make ESG risk management a direct part of prudential banking operations in Hungary.
• ESG is no longer a separate compliance area: it must be integrated into strategic planning, risk appetite, ICAAP/ILAAP processes and decision-making.
• Institutions must establish a concrete ESG risk management plan with clear timelines, milestones and at least a 10-year horizon.
• Management responsibility, the operation of the three lines of defence, and forward-looking analyses based on data all play a key role in supervisory compliance.
• The local adaptation of group-level ESG frameworks may present a particular challenge, while structured adaptation can also strengthen business stability.

Not a separate area, but core operations

One of the most important messages of Hungarian regulation is that ESG risks should not be treated as a separate field. The expectation is that these risks should appear as part of existing frameworks.
This becomes particularly tangible in the following areas:

• strategic and business planning;
• risk appetite and limit systems;
• ICAAP/ILAAP processes;
• as well as portfolio and product decisions.

The emphasis is therefore not on creating new processes, but on extending existing ones with ESG considerations.

What exactly does the MNB expect?

Only a few months are available between the final MNB recommendation and its application. This creates a particular challenge for institutions that do not yet have a transition plan in place, while banks with international backgrounds may have an advantage in this regard.

The MNB recommendation applies to a wide range of institutions falling under the Hpt., including credit institutions, Hungarian branches of foreign banks and certain investment firms.
The recommendation defines in detail the framework for managing ESG risks: institutions must be capable of identifying, measuring, managing and continuously monitoring these risks.

The principle of proportionality continues to apply; however, this does not mean exemption. The difference lies in the depth and complexity of implementation, not in the necessity of meeting expectations.

The central role of planning

Based on Section 109 (2a) of the Hpt., institutions must develop their plan for managing ESG risks. This plan will form one of the foundations of operations in the future.

According to supervisory expectations, the plan must clearly include:

• the timeline for managing ESG risks;
• the related milestones and target values;
• as well as their connection to business strategy and the risk management framework.

A key consideration is the long-term approach: ESG risks must be interpreted not only in the short and medium term, but also over at least a 10-year horizon.

Management responsibility and governance

The management of ESG risks is clearly a leadership-level responsibility. The supervisor expects decision-making, execution and control processes to be clearly separated and documented.

The operation of the three lines of defence is also crucial in this area:

• the role of business areas in client relationships and risk identification;
• the integrating role of risk management functions;
• as well as the independent assessment of internal audit.

In practice, from a supervisory perspective, it will be decisive whether the ESG framework is supported by genuine management oversight and consistent operation.

Forward-looking approach and data requirements

The management of ESG risks increasingly requires a forward-looking approach. Scenario analyses, vulnerability assessments and long-term impact assessments are becoming defining tools.

At the same time, the role of data management is also increasing in importance. Institutions must ensure that the necessary data are available for planning and monitoring.

Supervisory expectations, however, do not point toward a perfect data environment, but toward transparent and controlled operations.

This includes:

• identifying data gaps;
• documenting assumptions;
• as well as monitoring risks and objectives through appropriate indicators.

Focus areas in 2026

Based on the current regulatory environment, several areas require particular attention from institutions:

• harmonising the ESG risk management framework and clarifying internal definitions,
• closely linking planning processes to prudential operations,
• strengthening decision-making processes,
• establishing data management and methodological frameworks,
• as well as integrating forward-looking analyses into business decisions.

Following European-level expectations, Hungarian regulation clearly defines the framework for practical implementation. ESG risk management is therefore no longer present only at guideline level, but as part of everyday banking operations.

A challenge may arise in determining to what extent an available group-level transition plan can and should be localised (for example, this may also create issues in risk management where this is designed at group level).

Institutions that implement this integration in a timely and structured manner may achieve not only regulatory compliance, but also a more stable business position.