MNB to support phaseout of retail FX loans
The National Bank of Hungary (MNB) today announced that the institution would provide from its own FX reserves the foreign currency needed to pay refunds due under the borrowers' relief law – and for conversion of FX retail lending stock.
The borrower’ relief legislation approved in the summer requires refunds to borrowers, expected to total about HUF 1 trillion, from banks – for using exchange rate margins when calculating repayments on FX loans and for making unilateral changes to loan contracts. Under the government’s plans, once the refunds are settled, all retail FX loans would be phased out of the Hungarian market and converted into forints.
Today the central bank announced that it would allocate €3 bln of the bank’s FX reserves to cover demand related to the settlement of the refunds. But MNB did not mention any figures related to the plans to phase out FX loans and convert them into forints.
"The aim of the MNB’s program is to ensure that the phasing-out of household foreign currency loans is carried out in a rapid and well-organised manner, safeguarding the stability of the financial system and without significantly affecting the exchange rate of the Hungarian forint," the central bank said in its announcement.
The central bank said it laid down "as a basic principle" when developing the program that "the reserve adequacy of the central bank must be continuously maintained".
The MNB’s program is scheduled to become available for banks from October 13. The central bank is expected maintain the program in the phase connected to the settlement of the refunds at least until the end of March 2015. The central bank said it allocated €1 bln for unconditional transactions and €2 bln for spot euro sales conditional on the reduction in short-term external debt.
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