The European Commission has approved Hungary’s €2 billion capital injection into development bank Magyar Fejlesztési Bank under EU State aid rules.

The measure, equivalent to HUF 760 billion, will be financed through the Recovery and Resilience Facility. It is intended to expand the bank’s ability to provide funding in sectors affected by market failures.

The identified sectors include infrastructure, agriculture, environmental protection, education, tourism, sports, urban and rural development, and regional convergence.

Hungary’s amended Recovery and Resilience Plan, which is awaiting approval from the Council, sets out four uses for the funding.

The capital injection will support Magyar Fejlesztési Bank’s SME competitiveness programme and its capital programme for early-stage growth, innovative companies and SMEs involved in the green and digital transition.

The funding will also be used for the bank’s rental housing and student dormitory development programme and to co-finance projects with the European Investment Bank under Hungary’s Recovery and Resilience Plan.

The Commission found that the measure would facilitate the development of economic activities and concluded that the aid was necessary, appropriate and proportionate.

Hungary has committed to restricting the bank’s financing activities to areas where relevant market failures exist. It will also introduce measures intended to prevent the displacement of private-sector operators and ensure that Magyar Fejlesztési Bank does not undercut financial institutions operating in Hungary.