Central bank could assist conversion of €8 bln in FX loans

MNB

The Hungarian National Bank (MNB) is ready to use some of its foreign exchange reserves to ease the conversion of forex loans to forint loans, said Márton Nagy, managing director of the bank, according to reports.

As the forint's value has fallen, and loans based in foreign currency have become more unreasonable for borrowers to repay, the government has declared the goal of eliminating these loans. A law passed in June is forcing banks to compensate borrowers for some of the losses they accrued, and banks are expected to pay out €3 bln in compensation.

Even after banks pay this compensation, an estimated €8 bln would be needed to help eliminate the forex loans from the market, Magyar Hírlap said on Saturday. The government could tap into Hungary’s international reserves, of around €36 bln to help banks in the conversion of the outstanding forex loans to forint loans, Nagy was quoted as saying. He cautioned that any such move would have to be made gradually.

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