ECB's Draghi warns Hungary on FX loan scheme -paper
VIENNA Oct 14 (Reuters) - European Central Bank President Mario Draghi has warned Hungary not to impose unilateral steps forcing banks to convert foreign currency loans into forint credits, an Austrian newspaper reported.
Der Standard cited Austrian central bank Governor Ewald Nowotny as saying in Washington that Draghi had turned up the pressure on Hungary in his role as head of the European Systemic Risk Board (ESRB), which monitors potential economic problems.
He was concerned that the programme could accelerate a decline in lending, which would have a negative impact on stability and growth, it added.
It cited Nowotny as saying Budapest had agreed to coordinate any steps with European partners.
Hungary's Economy Ministry last month ruled out a one-off drastic conversion of foreign currency loans into forints but said the country's mostly foreign-owned lenders would still have to brace for losses.
Prime Minister Viktor Orban's government has previously given banks operating in Hungary until Nov. 1 to come up with a proposal to phase out foreign currency mortgages or face a government solution that would "eliminate" these loans.
The ECB declined to comment on the Standard report. Last year, it issued a legal opinion expressing some concerns about the potential adverse effects of such loan conversion programmes and urging more dialogue with lenders. here
A spokesman for Austria's central bank confirmed Austria had put the Hungarian matter on the ESRB agenda but he had no other comment. Hungarian government officials were not immediately available.
Foreign banks whose Hungarian units may be hit by a new relief scheme include Austria's Raiffeisen Bank International and Erste Group, Germany's Bayerische Landesbank and Italy's Intesa Sanpaolo. Hungary's dominant banking player is homegrown OTP. (Reporting by Michael Shields in Vienna, Sakari Suoninen in Frankfurt and Krisztina Than in Budapest; editing by Patrick Graham)
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