Josef hírek

2011.09.11. 10:35

Banks, markets wary of ruling parties forex mortage proposal

Budapest, September 9 (MTI) - Hungary s Banking Association gave warning on Friday that a proposal by the Fidesz and Christian Democratic parties to allow forex borrowers pay off their mortgages in full at a much lower exchange rate than current levels -- and for the banks to bear the cost -- could endanger the country s financial stability.

Budapest, September 9 (MTI) - Hungary s Banking Association gave warning on Friday that a proposal by the Fidesz and Christian Democratic parties to allow forex borrowers pay off their mortgages in full at a much lower exchange rate than current levels -- and for the banks to bear the cost -- could endanger the country s financial stability.

Fidesz group leader Janos Lazar said on Friday that mortgage repayments under the proposal would be fixed at 180 forints to the Swiss franc and 250 forints to the euro, and banks would have to bear the entire cost of the transactions.

 

Hungary s Banking Association said that the ruling parties proposition could end up endangering the stability of the country s financial system with a correspondingly drastic impact on the economy. The association s board, which held an extraordinary meeting after the announcement, issued a statement calling "the government s attention to expected consequences and distresses".

 

The National Bank of Hungary in a statement today reaffirmed its opinion given earlier in the week that it could only conceive of a solution which did not present a danger to the stability and operability of Hungary s financial system.

 

Analysts told MTI that should the government approve the ruling parties proposal, a contraction in the ratio of borrowers with forex loans could improve Hungary s standing in international markets -- but at a serious price, with a weakening of the forint and massive losses for banks.

 

Akos Kuti of Equilor said that reducing the proportion of forex loans would remove a major risk factor for Hungary and improve perceptions of the country abroad while hitting the shares of Hungarian banks. He added, however, that the plan was unlikely to be taken further in its current form.

 

Zsolt Kondrat, chief analyst with MKB Bank, said the greater the number of borrowers repaying their mortgages in full, the bigger the banks losses, while the demand for foreign exchange would further weaken the forint.

 

The forint slipped to its weakest level against the euro since January after the announcement, trading at 281.20 from around 276 the previous day. The forint traded at 231.50 to the Swiss franc, softening from 228.44 on Thursday.

 

The main Budapest share index, meanwhile, shed over 6 percent as banking shares, most notably those of Hungary s largest lender, OTP Bank, were suspended after the announcement on Friday afternoon after losing 10 percent of their value.

 

Lazar told a news conference after a meeting of the ruling party groups in Hajduszoboszlo, E Hungary, that the government would come to a final decision on Sunday. If this option was adopted, it would apply, too, to contracts already terminated over the past three months, he added.

 

Peter Szijjarto, the prime minister s spokesman said by reducing foreign currency-based loans the country s vulnerability would ease, "giving more freedom for Hungary and Hungarian families".

 

Leader of the main opposition Socialist party, Attila Mesterhazy, slammed the announcement as a "dangerous political bluff". He said that for most troubled borrowers the proposal did not present an alternative solution, while people with major savings would not have any problem paying the higher monthly installments anyway.

 

He said the Fidesz plan would cause more problems than it solved, presenting a threat to the stability of the country s financial sector while not actually addressing the problems of the majority of forex borrowers.

 

Radical nationalist party Jobbik said the plan was "disturbing and vague". Jobbik lawmaker Janos Volner said it was as yet unclear what kind of conditions would be attached to the plan, adding that it was doubtful to "what extent the governing parties were on the side of the people as opposed to the banks".

 

The parliamentary leader of green party LMP, Andras Schiffer, said the Fidesz proposal would only help the comfortably-off and squeeze banks purely in order to give a chance to people already in a position to pay off their loans in full to do so.

 

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