Hungary banks clueless about PM's message

Banks in Hungary have been forced to assume a defensive position recently; the Banking Association considers it an important priority to change this in the near future, Secretary General Levente Kovács said. He descibed the nature of the crisis primarily as a lack of confidence, with signs of a "freeze" apparent from time to time in the banking sector, and a "shadow effect" that is expected to hamper the process of recovery. Kovács said he was personally sceptical about the W-shaped recession theory, however, he agreed that the process of thawing was going to be slow and may take several years.

"While there is a lot of discussion about their situation, FX mortgage holders are not the ones in the biggest trouble; it is mortgage holders who have lost their jobs," Kovács noted. The Secretary General has therefore argued in favour of sophisticated measures that are able to differentiate between various groups of borrowers. "There are borrowers who opted for FX debt for speculative purposes. The Asset Management Agency should assist the genuinely financially challenged, not these people," Kovács argued.

Kovács said the recent days marked a shift in clients' attention who are now showing more interest in governmental debt restructuring plans than those offered by the banks themselves. The State Financial Supervisory Authority is tracking applications on a daily basis, Kovács added.

The governmental bailout program causes major losses to banks, Kovács claimed. He has explained that any revenue on the special forint accounts created in the process of exchange rate fixing is lost to banks, while the latter's money gets tied in credit thus extended to clients and cannot be utilized for extending new loans. In addition, the Asset Management Agency is purchasing real estate at depressed prices, which generates further losses to banks, Kovács said.

In a radio interview on Wednesday morning, Hungary's Prime Minister Viktor Orbán said banks would have to participate in the financial burden resulting from the ill-advised FX lending practices of the past, highlighting this task as one of the key priority for this fall. Orbán noted that the exchange rate barrier was already in place, the repossession bailout program was going to be continued or even get added features. Kovács was reluctant to comment on these statements or venture a guess as to their specific meaning as the Banking Association has not yet been officially contacted by the government.

However as concerns splitting the costs of the bailout, Kovács highlighted one fact: a comparison of the HUF 120 billion profit tax paid by the banking sector this year and the HUF 2 billion setup and operating cost of the Asset Management Agency which is paid for by the state clearly shows how financial burdens have been divided so far.