Economy Journal Online: Hungary after conversion loans: relief for customers and banks …

Sunday, June 21, 2015

Hungary after conversion loans: relief for customers and banks … – TVN24 Business and World

Nearly half a year after the entry into force of the Hungarian Act on automatic conversion of foreign currency loans fell to HUF financial burden on households, but increased the pressure on the banks.

January 1 came into force adopted in November last year a law according to which all mortgages in francs, euros and yen were automatically converted into forint loans. In accordance with an agreement between the banks and the team of Prime Minister Viktor Orban, the conversion rate for the franc stood at 256 forints and 309 forints per euro (it was the course of November 7 ub.r.).

Step Orban

In some cases – eg. if the borrower gets paid in the currency of the loan – could apply for leave credit in foreign currencies, but the vast majority of loans conversion.

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Team Orban decided to take such a step to alleviate the many citizens who pozaciągali mortgages before the crisis of 2008., and then found themselves in a spiral of debt. The value of those loans totaled the equivalent of 10 billion euros.

The Secretary General of the Association of Hungarian Levente Kovacs rated banks in the second half of May that borrowers have gained on this bill for a total of one trillion forints (13.3 million zł), ” and it’s as if everyone, from baby after the old man, he got 100 thousand. forints (over 1.3 thousand. zł). “

– In Hungary, the amount of the installments of households fell by roughly 20 percent ., which is advantageous also from the macroeconomic point of view, as it stimulates internal demand – he said in response to PAP former President of the Hungarian National Bank prof. Gyoergy Suranyi, asked to assess the impact of the Act on currency translation of loans.

Are followers

The move Orban government, ahead of the January jump franc, has gained recognition abroad. The International Monetary Fund in March communication positively assessed the condition of the Hungarian economy, stressing that, thanks to strong domestic demand, GDP grew in 2014. By 3.6 per cent., As well as falling unemployment. – Exposure (economic) shocks has been steadily declining thanks to the large and persistent surplus current account balance and recent political decisions, including currency conversion of foreign currency mortgage loans to local currency – said the IMF.

The Fund stressed however, that the law , along with earlier, requiring banks to compensate customers spreads and unilateral adjustments in the contracts, seriously affected the banking sector.

– And without that deficit, the banking sector recorded a loss equating to approximately 2.5 per cent. GDP. This of course severely limits the creditworthiness of banks, and so is unfavorable for growth – rated Suranyi.

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Some banks had to restrict the activities. The Hungarian subsidiary of Raiffeisen recorded for 2014. Deficit of 115 billion forints (1.5 billion zł), primarily due to conversion of loans. It forced her to close almost half of the windows and the reduction of staff. Another bank, OTP, recorded a deficit of 102 billion forints (1.4 billion zł).

You could divide

According Suranyiego financial burden arising from the Act had morsel. – The resulting situation next bank is also responsible economic policy, including monetary policy, as well as banking supervision, so the burden should be divided – said Suranyi.

He added that the law has not helped about 120 thousand. families that even before its adoption were not able to repay the loans.

Suranyi think that the faster conversion will be carried out in Poland, the better. – Even though we were late, because the first draft prepared at the beginning of 2011., When the euro hovered around 280 forints and the Swiss franc around 210 forints. Last year’s conversion took place at the rate of 309 forints per euro and 256 – for the franc. This means that losses increased by 10-20 percent. – He stressed.

He drew attention to the fact that the same conduct conversions protect customers – and indirectly the banks – against the risk of further changes in exchange rates, but not enough to guarantee a significant beneficial effect.

– The situation of households will significantly improve when the installments fall significantly. For that to be advantageous configuration of all conditions – interest rates, margin, maturity date, as the conversion itself carried out after the current exchange rate will not bring savings in the short run – PAP interlocutor stressed.

The January conversion in Hungary, covered only mortgage loans, but there is still approx. 250 thousand. people who took out car loans in foreign currency and other consumer loans. Monetary Council of the National Bank announced in early June that the central bank is prepared to provide the banks with foreign exchange value of 1.1 billion euros for the conversion of other loans.