MNB launches DLT-based register for banks and insurers

The Central Bank of Hungary (MNB) on March 3 launched a database for mortgages and home insurance that leverages distributed ledger technology.

In a statement, the MNB said the technology would make it easier to cross-reference properties used as collateral for mortgages and the insurance purchased on them.

The MNB expects eight lending institutions and 11 insurers – “covering the majority of the mortgage collateral property insurance market” – to be onboarded into the system during the first half of 2025.

The central bank said that at the end of 2024, Hungarian insurers had 622,000 policies with residential property as collateral, and that 13 insurers were offering these policies “in co-operation with several lending institutions”. However, the decentralised nature of these arrangements had complicated communications between insurers and mortgage lenders.

The MNB said it needed a registry that was operated by participants from both sectors, and which enabled lenders and insurers to query data directly.

Under the new system, the central bank said lending institutions could make sure that the real estate they provided loans for was actually insured and that the policies were compliant with their own standards. It added that the additional security provided by the new system could even lead to a reduction in the capital requirements for participating lenders.

The MNB said the system “significantly speeds up the processing time between parties and reduces the data reconciliation and administrative burdens on lending institutions and insurers”. This, it said, was because data transfers between institutions would be documented, thereby ensuring transparency.

For consumers, the MNB said it had prioritised privacy, and data could only be transferred with legal authorisation in strict compliance with the EU’s General Data Protection Regulation. Only the lender and the insurer would be able to access data related to an insurance contract – and only with the consumer’s consent, the central bank said, noting that not even the MNB would be able to look into these details.

“When applying for a mortgage loan, customers can handle their affairs exclusively at the lending institution, instead of visiting multiple institutions, and in the case of switching insurers, there is no need to make a separate notification to the bank,” the central bank said.

This is the latest development in the MNB’s digitisation and innovation drive, which proliferated under György Matolcsy’s two terms as governor. Under his successor, Mihály Varga, who took office today (March 4), the MNB has said it will be “moderating activities” that fall outside its core central banking tasks.