The Hungarian banking market has changed considerably in the past few years. The sale of MKB Bank and Budapest Bank to Hungarian investors has led to an increased presence of local banks on the market. Currently, three leading Hungarian banks, MKB Bank, Budapest Bank and Takarékbank, are in the process of performing an unprecedented merger which would lead to the creation of the second largest bank in Hungary, just behind OTP Bank, the ultimate leader of the Hungarian and the regional banking market.
Until the 2008 crisis, the local banks were not deeply involved in providing acquisition financing; however, in recent times, OTP Bank has had an increasing role in this segment. In addition, MKB Bank has always been extensively involved in project finance and acquisition finance transactions, therefore the new local mega bank involving MKB Bank will also have a strong position on the market. Finally, the Hungarian investment bank, MFB Bank, is also active in providing acquisition financing.
International banks are also present on the market, either via their local subsidiaries or via participation in syndications in cross-border transactions. Unicredit Bank, Citi Bank and Raiffeisen Bank are the most active international actors.
Non-banking acquisition funding also exists in Hungary but its significance is not comparable to bank financing.
The M&A volumes in the Eastern European region, with an aggregate figure of USD14.5 billion, represents only a small portion of the aggregate European level, which was over 1000 billion in 2020. However, M&A activity increased in 2020 in Hungary, where the aggregate volume reached USD1.13 billion, representing roughly double the equivalent figure in 2019. This increase was driven by a few major deals, such as the acquisition of Aegon, and the sale of the real estate portfolio of Goodman, with each transaction worth around EUR1 billion. A further key transaction was the acquisition of RWE’s local subsidiaries by E.ON and E.ON’s subsequent sales transactions with MVM and Opus, of which the latter is currently in course.
LBO activity in Hungary also increased in 2020 compared to 2019; however, this increase totalled overall four deals in 2020 for an aggregate deal value of EUR55 million, which is close to the aggregate deal value in Poland. The private equity activity in Hungary otherwise showed a stagnation compared to 2019, which was a huge breakthrough compared to the levels of 2018.
Hungary introduced a repayment moratorium of loans and credit facilities (including cross-border financing) provided by banks and financial institutions to Hungarian private persons and legal entities. This moratorium ended on 31 December 2020 but was further maintained in a more restricted scope until 30 June 2021. The moratorium, however, did not affect new funding, therefore banks were able to finance new transactions. Nevertheless, banks set stricter conditions for financing, setting more severe requirements for the borrower’s own resources. The interest rates were maintained at a low level by the protecting activity of the National Bank.
Hungary further adopted new regulations limiting acquisitions by foreign persons in areas of the Hungarian industry qualifying as strategic for the country. Any such acquisition requires approval by the competent ministry. The regulation existing prior to the COVID-19 pandemic affected only investments by non-EU investors and in only a fairly limited area of the industry. The newly introduced regulation also affects EU investors and a wider scope of the Hungarian economy. The limitation was introduced only for a temporary period of time, ending on 30 June 2021, but it has already been extended, at the end of 2020, and will probably be applicable until the end of the pandemic. The rationale behind the limitations is to protect the Hungarian companies in strategic industries from being acquired by foreign entities in this period of economic crisis.
Governing law typically follows the place of incorporation of the financier. Accordingly, governing law will be Hungarian in respect of purely domestic deals; however, if the financing is provided cross-border by a foreign bank, the bank’s local law typically applies to the loan documentation. It is also common practice that the security documents are governed by Hungarian law, except where the secured asset is not located in Hungary.
Syndicated loans are mostly governed by loan market agreements (LMA) loan documentation; furthermore, cross-border financing, including leveraged buyouts (LBOs), also makes use of LMA. Local deals are usually governed by the bank’s own forms, which very often apply their general terms and conditions as a background regulation of the loan documentation.
Hedging arrangements are used in cross-border transactions, which are nearly always regulated by International Swaps and Derivatives Association (ISDA) form agreements.
The security agreements relating to syndicated loans or otherwise cross-border transactions usually vary according to the practice of the legal counsels of the financier; however, there are market-standard clauses used by most of the notable law firms active in this area.
All transactions involving an international element are prepared and signed in English. LMA-based documents are also typically signed in English. The purely domestic deals, where no international financier is involved, are documented in Hungarian, even though the biggest companies, like MOL, have English documentation even in local transactions. Some security documents that are underlying registration in public registers are prepared and signed in both English and Hungarian.
Legal opinions are usually conditions precedent of syndicated loan transactions and cross-border transactions. Domestic deals usually do not include legal opinions except if a syndicated loan is provided or otherwise the LMA documentation is used due to the size of the transaction.
When legal opinions are required, it is common practice that a validity and enforceability opinion is required to be provided by the lender’s counsel and a capacity and authorisation opinion is provided by the borrower’s counsel. Some US-based financiers tend to require validity and enforceability opinion also from the borrower’s counsel; however, this is resisted by Hungarian counsels unless the borrower’s counsel is preparing the loan documentation. In cross-border transactions, the lender’s local counsel is required to provide an opinion only regarding the security agreements, as the loan and intercreditor agreement is governed by the law of the foreign lender.
The structure of the legal opinions is relatively standard; however, the exact wording of opinion itself may vary, as different lenders may require different wordings. Also, qualifications and reservations, although they show some similarities, differ considerably depending on the law firm issuing them.
A senior loan is the most commonly used loan structure, given that banks have a leading role in the acquisition financing market, and that they rarely adopt unusual financing solutions.
In domestic deals, the bank’s usual requirement is to be in the senior position, possibly as exclusive financier. The percentage of the investor’s own resources for the transaction is relatively high and, with the pandemic, the banks became even more conservative. Consequently, a loan-to-value ratio rarely exceeds 50–60%. In cross-border deals, senior and junior facilities are more frequently used, and the adopted loan-to-value ratio is also higher.
In domestic deals, the existing indebtedness of the target is also typically refinanced by the lender, reaching the position of exclusive financier of the target. This is, however, not common practice in cross-border deals except where the financier has a local branch. Given the relative instability of the Hungarian currency compared to the euro, the purchase price is frequently defined in euros rather than in forints. In such a case, the financiers, even in domestic deals, require a hedging arrangement from the borrowers.
Usually, banks in Hungary do not offer mezzanine or payment-in-kind (PIK) loans. Mezzanine loans are, rather, provided by private equity funds or other non-banking entities.
The purpose of the mezzanine loans is essentially to fill the gap between the high own-resource requirement of the senior lender bank and the available equity of the investor. The mezzanine loans are typically subordinated to the senior loans and have only limited securities that do not interfere with the securities of the senior loans.
PIK loans do not have market practice in Hungary.
Bridge loans are rarely applied in acquisition financing transactions. If applied, both banks and other non-banking entities provide them. A bridge loan is used for deal-specific short-term purposes.
If banks are providing the bridge loan, they require second-ranking securities following the senior loan, while non-banking organisations may accept subordination as well; however, this will result in higher interest and cost levels.
Bonds are very rarely applied as a financing vehicle in Hungary in general and there is no generally accepted market practice in this respect. Only very few companies have issued bonds in Hungary.
Given this lack of bond financing, the Hungarian National Bank introduced in 2019 a new financing product consisting of issuing bonds with a guaranteed subscription by the National Bank at a level of 70% of the issued volume at a preferential interest rate. This programme has been further extended in 2021 and, given that no requirement is set for the purpose of this financing, it may also be used for acquisition finance purposes. The only limitation is that it is available only in Hungarian Forint. The requirement for being eligible for bond issue is to obtain a sufficient debt rating level from a debt rating organisation recognised by the National Bank. To date, more than 50 companies have obtained the required credit rating for bond financing.
Although there are no uniform samples for the information prospectus, the content thereof is highly regulated (partly by EU Regulation No 2017/1129, which has been applicable from mid-2019 in Hungary), therefore, the main structure of the documentation is considerably standardised.
Private placements in Hungary are also rarely applied financing methods in Hungary. The regulatory background of private placements in Hungary is the same as the regulation applicable to bond financing; see 3.4 Bonds/High-Yield Bonds.
Promissory notes (in Hungarian váltó) have a considerable regulatory framework (based essentially on the 1930 Geneva treaty), however, it is not standard practice in Hungary. Loan notes, however, have no background regulation and are not common practice in domestic deals.
The assets of the target company are frequently collateralised in acquisition financing in Hungary and, thus, this form of financing is frequently used, both in domestic and in cross-border deals. As Hungary has a public register of asset charges, this type of collateral is very frequently applied. For details on this type of security, see 5.1 Types of Security Commonly Used.
The structure of asset-based financing is similar to a secured senior loan with the difference that senior loans usually have further collaterals. Asset-based financing sets the registration of the asset collateral in the charge register as a condition precedent to draw-down and the documentation is typically notarised. The legal exposure associated with charged assets is the eventual transformation of a raw material into a finished product or the indication of the charge created over an asset which is otherwise not registered in a public register (which is the case in respect of most assets in Hungary except for vehicles). For this reason, usually other collaterals are established in Hungarian acquisition financing. For further details, see 5.1 Types of Security Commonly Used.
In the case of LMA-documented and cross-border syndicated loan agreements, it is standard practice to have an intercreditor agreement. In domestic deals, the lenders typically do not conclude intercreditor arrangements, they simply follow the statutory regulations applicable to ranking, satisfaction and subordination.
Where an intercreditor agreement is applied, there are standard clauses generally applicable, such as:
In domestic deals, the common practice is to adopt subordination rules between the lender and the sponsor. For this purpose, lenders usually require a separate arrangement whereby the sponsors undertake towards the lender subordination obligations such as a limitation on distributions by the target to the sponsor.
In the case of insolvency of the borrower, subordination arrangements may effectively be applied by the applicable priority rules of Hungarian insolvency law. In addition, if the lender is secured, this would not only grant a satisfaction preference, but would allow priority to the secured lender from the proceeds of enforcement of the charged asset. For details, see 5.7 General Principles of Enforcement.
Given the low number of this type of deals in Hungary, there is no standard practice specific to bond financing.
Hedge counterparties are contractors of intercreditor arrangements only in cross-border syndicated loan transactions; otherwise, hedge counterparties are not involved in intercreditor agreements, therefore, no general practice exists in this respect.
A typical security package would cover the following assets:
In some specific cases, intellectual property rights are also charged, but it is not the typical security.
This is typically a Hungarian law-governed instrument unless the share charge is affecting the shares in the foreign sponsor, in which case the law of the place of registration of the sponsor would apply. The share security usually not only affects the shares, but all rights and obligations deriving from the shares, including a right or claim for dividend. While its enforceability is questionable, it is also common practice in Hungarian share security arrangements to provide a power of attorney to the bank to be able to exercise shareholder rights in the case of an event of default. For registration purposes, a short-form bilingual share-charge agreement is necessary in addition to the main share-charge agreement, even in cross-border deals.
The bank account charge is usually accompanied by a prompt-collection authorisation right of the bank, and a three-party arrangement with the account-keeping bank, granting a security deposit in the case of opening of the financier’s right for satisfaction. The latter arrangement is required by the lender for enforcement reasons. Given that the account-keeping bank’s acknowledgment of the account charge and consent to the collection authorisation and security deposit is required, this package of security is usually more time-consuming to perfect than the other securities. In domestic deals, the account-keeping bank and the financier is usually the same entity, therefore in such a case this arrangement is easier to realise. A security deposit in domestic deals is further applied in respect of a certain amount that is continuously kept blocked by the bank on the affected bank account. This is an increased security applied in the case of borrowers with higher risk of repayment.
Usually, the entire inventory is not attached to the agreement, only the most relevant elements thereof. This is possible because Hungarian law allows charging assets without individually identifying the charged assets. In the case of an attached list of inventory or charged assets, it is common practice to require the chargor to provide a regular update of the list. Otherwise, see 4.1 Typical Elements in respect of asset security.
In Hungary, notification of the obligors of the receivables is required for perfection purposes; however, borrowers usually resist the financier’s request for obtaining the obligors’ acknowledgment of the notification, they accept only a best-effort undertaking in this respect.
As the real property mortgage is registered in the land registry, the mortgage agreement is always signed at least in bilingual form, even in cross-border deals. In most of the deals, the condition precedent to draw-down is the submission of the mortgage agreement to the land registry, but the actual registration in the land registry is not a condition precedent. Although not a security, but a restraint on alienation and encumbrance is also usually registered in the land registry to protect the interest of the bank.
Validity of the security agreements is linked to the written form only. However, court enforcement of the security does not require a prior court procedure if the loan and security agreements are notarised. Therefore, it is common practice to have these agreements notarised. However, in the case of an LMA-based cross-border deal, the Hungarian notary will not notarise the loan agreement governed by foreign law, therefore, different solutions are applied. Some law firms attach the loan document as an exhibit to the security agreement, which, however, is not suitable to be notarised. The other solution aims at inserting the main clauses of the loan agreement in the notarised part of the security agreement.
As mentioned in Section 5.2 Form Requirements, an extract of the share security agreement is usually prepared for registration purposes. The content of this extract is highly standardised, as it contains only the required minimum necessary for the registration.
Real property mortgage agreements also have standard provisions in order to comply with registration requirements; however, it is not common practice to prepare an extract as opposed to the share charge. The reason for this is that only the owner of the real property may have access to the submitted agreement, while agreements submitted to the trade register are freely accessible by anyone. If the mortgage agreement is not notarised, it must be prepared and countersigned by an attorney-at-law.
There are typically three different registers where securities can be registered in Hungary: (i) the charge register, (ii) the land registry and (iii) the company register. Out of these registers, only the land registry and the company register grant an in rem certification of the data registered, while the charge register is rather an indication of the pledges and charges registered. The date of registration defines the ranking of the security where the better-ranked security has priority over the other securities. This priority applies in the satisfaction of a claim in insolvency proceedings, and in the case of enforcement of the security.
In cross-border deals, typically the legal advisers receive a power of attorney from the bank to sign the security agreements on behalf of the bank that usually requires an Apostille. The Apostille certification is in most countries (especially in Germany) time-consuming, which can delay the creation of a notarised security.
Most of the securities are subject to registration in the Credit Security Register kept by the Chamber of Hungarian Public Notaries (the charge register). These securities are: charge over (i) receivables, (ii) bank account, (iii) movable assets, inventory. Registration of security in the charge register is simple and immediate in cases where the security agreement is notarised, as registration is made and performed by the notary public immediately upon signature and notarisation of the security agreement.
The security over a share is registered in the company register. Registration is a perfection requirement; however, registration is made retroactively to the date of signature of the share security agreement. The registration procedure takes roughly two weeks and is fully electronic; scanned documents are submitted to the Court of Registration.
The real property mortgage is subject to registration in the land registry, where registration is made retroactively to the date of submission of the request for registration. The registration process usually takes several weeks; however, land registry offices in Budapest are slower, so here registration process may take several months.
There are some further specific public registers such as the register of trade marks, the register of boats, the register of aeroplanes, etc. Charges established on these assets are registered in these respective registers.
Finally, lenders in most deals require the borrower to register the security in their books and records. This is, however, not a validity requirement of the security.
There is no general restriction on upstream security in Hungary. However, if the secured claim of the bank exceeds the owned assets of the subsidiary which secures the debt of the parent company, it is common practice to include limitations in the loan agreements to limit the subsidiaries’ level of liability.
Financial assistance rules apply in a limited scope in Hungary. Only publicly listed companies are restricted from granting financial assistance to the acquisition of interest but, even in such a case, it might be permissible if some pre-defined conditions are satisfied.
The Hungarian banking act identifies more specific financial assistance rules and prohibitions in respect of the acquisition of interest in Hungarian financial institutions. The relevant EU Regulation No 575/2013/EU further sets restrictions in this respect; however, it does not prohibit any such financial assistance but rather disqualifies them from the calculation of the financial institution’s own fund.
A more general restriction exists with regard to unlawful distribution to shareholders, which is permitted only if the company has sufficient resources and only by way of distribution of dividends. Therefore, any other form of distribution made to shareholders is restricted and the securities and guarantees granted by subsidiaries to their parent company must comply with this restriction.
A general principle in Hungary is that debtors may not deprive existing creditors of their basis of satisfaction. This means that a borrower must not purposefully diminish the value of its own assets or its other funds in order to frustrate the satisfaction of the creditors’ claim. In some cases, granting an overwhelming security over the assets and/or operation of the company may lead to such a result, therefore this principle must be taken into account in huge cross-border deals secured or guaranteed by a local subsidiary.
For the aforementioned reason, upstream, cross-stream and downstream securities must be made on an arm’s-length basis, therefore it is important to be able to demonstrate that the granting of security was also in the involved parties’ corporate interest.
As mentioned in 5.2 Form Requirements, the enforcement of a notarised deed is easier in Hungary, as the notary who notarised the security document is authorised to attach an enforcement certificate to the notarised deed in the event of the occurrence of an event of default. Otherwise, a court procedure would first be required to establish the occurrence of an event of default and the opening of the right of satisfaction of the lender.
With the enforcement certificate, the lender has the right to enforce its security via official court enforcement led by a court bailiff (bírósági végrehajtó). This administrator is authorised to organise public auctions for the sale of the charged asset, or otherwise collect from the charged bank account or otherwise conduct a court-enforcement procedure in respect of the charged asset.
The lender has also its own statutory right to enforce its security via an out-of-court sale of the charged asset. In such a case, the Civil Code grants the lender the right individually to sell the charged asset to a third party and to satisfy its claim out of the proceeds of that sale. The right of the lender is, however, not unlimited; the Civil Code requires him or her to act in a commercially reasonable manner. For this purpose, usually security agreements contain a sales-price calculation method which the parties consider as being commercially reasonable.
If a liquidation procedure is commenced against the borrower, enforcement of the charged asset is possible only within the frame of the liquidation (via auction or other similar means aiming at achieving the maximum sales proceeds possible). Furthermore, even if the sale of the charged asset is sold prior to the commencement of the liquidation procedure, the liquidator may challenge the sale (see 7.2 Claw-Back Risk). Any such sale made within three months prior to the commencement of the liquidation and involving the shareholder as purchaser is deemed to be made without due consideration. The secured lender in a liquidation procedure has a double protection.
Hungarian law prohibits any arrangements under a security agreement whereby the parties agree in advance that the lender shall acquire the charged asset in the case of the occurrence of an event of default. An agreement to this effect, however, may validly be concluded following the occurrence of an event of default. Otherwise, arrangements aiming to achieve the foregoing are prohibited.
The new Civil Code (Act V of 2013) introduced general regulations on guarantee, due to the fact that previously only bank guarantees were regulated in the former Civil Code (Act IV of 1959). In addition, both the current and the former Civil Code contained detailed regulations as to personal suretyship (kezesség). The Civil Code further differentiates between direct and ordinary suretyship, where the direct surety may not request the lender to collect the owned amount first from the borrower, while an ordinary surety shall perform payment only if the enforcement against the borrower was unsuccessful.
If the sponsors are able to avoid the undertaking of guarantee or suretyship, banks still require a shareholders’ undertaking to be signed essentially accepting that distribution of profit would be made only in accordance with the requirements of the loan agreement and a further undertaking to obtain the lender’s consent for any change of control.
The main difference between guarantee and suretyship is that the surety may exercise rights and may refer to excuses that the borrower has otherwise, while the guarantor does not have such right.
Given the lack of regulation on guarantee in the previous Civil Code, guarantee requirements are primarily adopted in cross-border deals, where this form of security is commonly adopted. However, the lenders in domestic deals adopt direct suretyship. Ordinary suretyship is very unusual.
In principle, the same restrictions apply mutatis mutandis to guarantee and suretyship as in respect of security, ie, restrictions discussed in 5.4 Restrictions on Upstream Security, 5.5 Financial Assistance and 5.6 Other Restrictions.
These restrictions are even more important, since guarantee and suretyship are not indicated in the balance sheet as actual obligations and are not registered in public registers, therefore, third parties may not necessarily have knowledge thereof.
If the guarantee or suretyship is granted by a group company, usually no actual consideration is provided. However, third parties provide a guarantee for consideration. Some banks require as a security guarantee from an entity specialised in providing guarantees (Garantiqa); in such a case, the cost of guarantee considerably increases the loan costs.
The shareholders of the company under liquidation will always have a subordinated position even if they are secured. As previously mentioned in 5.7 General Principles of Enforcement, even a sale of the charged asset within three months of the commencement of liquidation will be deemed to be made in bad faith and without undue consideration. Furthermore, a secured shareholder will never benefit from the preferences described in 5.7 General Principles of Enforcement, it will always be in the lowest category of creditors in the liquidation. These rules apply not only to shareholders, but also to the group companies of the shareholder.
In addition, the liquidator and the other creditors will have the right to challenge all fraudulent contracts of the company under liquidation. If the challenging is successful, an eventual fraudulent secured lender might lose its priority if the security agreement is declared invalid (see in detail for the legal basis of challenge in 7.2 Claw-Back Risk).
Finally, Hungarian law knows the concept of shadow director. In some cases, the lenders obtain upon the occurrence of an event of default considerable governance rights in respect of the borrower. In such a case, they may be considered as shadow directors. In exercising such rights in a situation of insolvency, they shall have the fiduciary duty to take into consideration the interest of all other creditors of the borrower. If they fail to comply with this obligation, a piercing of the corporate veil may occur and the shadow director may have direct and unlimited liability towards the creditors for the losses arising from their breach of fiduciary duty. It is important to note, however, that Hungarian court practice is very restrictive in establishing someone qualifying as a shadow director and there is no known court case to date accepting any such liability of a creditor.
As mentioned in 7.1 Equitable Subordination Rules above, the liquidator and the creditors may challenge some arrangements that were concluded shortly prior to the commencement of the liquidation procedure. There are four categories of such a challenge.
In the case that the challenge is successful, the arrangement will be null and void and all received payments will have to be reimbursed.
In Hungary, a transaction fee is payable for every banking payment transaction at a rate of 0.3% of the amount paid but up to a maximum HUF6000. Otherwise, no stamp duty is applicable in respect of loans in Hungary, regardless of whether cross-border or domestic.
In Hungary, no withholding tax applies in cross-border transactions for a dividend or interest payment made to legal entities, including banks or private equity funds. Furthermore, no withholding tax applies to payment of interest in domestic financing.
Until 1 January 2019, thin-capitalisation rules applied only to loans other than bank loans. The general rule was that a debt-to-equity ratio of 3:1 would be applied for any related and non-related, interest-bearing loans, both regarding cross-border and domestic financing (but excepting bank loans). It was further applied to non-interest-bearing intra-group financing, provided that a transfer-pricing adjustment was made. If the financing exceeded the aforementioned 3:1 debt-to-equity ratio, the interest cost was not deductible for corporate tax purposes.
Starting from 1 January 2019, new thin-capitalisation rules have been applicable in Hungary, which constitute a harmonisation of Council Directive (EU) 2016/1164 of 12 July 2016 (the tax-avoidance directive – ATAD). According to this new legislation, the non-deductible interest cost is calculated as the higher of 30% of the tax EBITDA of the company or HUF939,810,000. The debt-to-equity ratio is no longer used, and the new calculation also incorporates bank loans, ie, interest payable under bank financing is also affected by the thin-capitalisation rule. Hungary adopted derogations as allowed under the ATAD. Accordingly, in the case of a taxpayer group, the ratio of net interest and EBITDA may be calculated at group level.
In Hungary, acquisition of interest in companies operating in regulated industries (eg, electricity, gas, banking, insurance) is subject to prior approval of the respective regulator. Accordingly, financing of such acquisitions will also be conditional upon the regulator’s approval and, usually, obtaining of the regulatory approval would be a condition precedent to draw-down.
Specific requirements exist in respect of the acquisition of interest in a Hungarian financial institution. In such a case, the regulator will verify, among others, the satisfaction of the following conditions.
In the event that a public takeover bid must be made with respect to publicly listed companies (typically, the acquisition of 25% or 33% of shares), the resources of the offered purchase price must be certified by any of the following:
At the beginning of the 2000s, Hungarian banking practice developed a country-specific security, namely, the call option established for security purposes. Under this security, the bank, upon opening of its right for satisfaction, was entitled to exercise a call option in respect of the charged asset at a purchase price calculated as a fair market price. The bank was entitled to set off its claim against the purchase price, thus only the amount above satisfaction of the bank’s claim was payable to the borrower. The advantage of this security was that it granted the bank an easy enforcement of the security. The problem with this arrangement was that not only banks, but also private lenders applied it and the settlement between the parties was not duly made. Several litigations and a significant number of court decisions resulted in a restrictive permission of this instrument.
In 2013, however, upon adoption of the new Civil Code, the legislator decided to prohibit any such security instrument as it considered that the new enforcement rules applicable to charges, pledges and mortgages grant sufficient comfort to the lenders in satisfying their claims out of the charged asset. This decision of the legislator, however, resulted in significant resistance by the banks, as not only did the banks frequently adopt this security instrument, but the former court practice also confirmed the legality thereof.
Following discussion between the Government and the representatives of the banks, the legislator reinstated in 2016 the possibility to provide this security, but only by financial institutions and only in cases of non-consumer loans. However, the application of this security instrument has become reduced further, remaining mainly in respect of loans with higher risk.