Government to eliminate FX loans

Foreign-currency denominated loans will be eliminated from Hungary's lending market by way of converting them to Hungarian forint (HUF) loans before the end of this year, Minister of National Economy Mihály Varga told public media on Monday.

A statement by the Ministry of National Economy says that based on a Supreme Court ruling, deeming the rate spread applied to foreign currency loan constructions unfair, Parliament adopted on Friday a bailout package. According to this, banks are expected to calculate in September and October how much borrowers should be repaid, Minister Varga stated. He added that he was certain that the recalculated instalments will be significantly lower than before.

In the given period, banks will calculate the difference between exchange rates they had applied for the disbursement and repayment of loans, and the mid-rate of the central bank, the Minister pointed out, but suggested that clients will also be reimbursed for extra amounts banks had collected through unilateral changes to agreements.

He also said that a proposal by the Banking Association, under which an exchange rate cap would be applied to all foreign currency loans, was not a good idea. Clients should "feel that the issue has been settled in a fair way: either through lower instalments or an amount credited to their account," Mr Varga stated. Both the way of reimbursing clients and the conversion of loans into forints will be governed by laws to be enacted in autumn.