BUDAPEST, July 1 Hungary's banks accused the
government on Tuesday of holding them collectively responsible
for borrowers' problems after shifts in the exchange rate soured
once-popular foreign currency mortgages.
The country's Bank Association criticised several points in
a proposed government bill, announced last Friday, which aims to
reduce bank charges on foreign currency mortgages and also
forint-denominated loans retroactively.
The new legislation, which parliament will likely approve on
Friday, is the first step of a comprehensive relief scheme for
Hungarians struggling to manage the foreign currency loans that
were once sought after for their low interest rates but turned
sour when Hungary's forint weakened.
The government plans to force banks to convert foreign
currency loans into forints, to eliminate the problem.
Hungary's top court has ruled that banks used some unfair
practices in charging for both foreign and local currency loans,
such as unilateral rises in interest and fees.
The latest measures could push hundreds of billions of
forints of losses onto the bank sector this year, analysts
estimated. A central bank deputy governor estimated on Saturday
that the costs could reach 2 billion to 3 billion euros ($2.7
billion to$4.1 billion).
Banks in Hungary include units of Belgium's KBC,
Austria's Raiffeisen Bank and Erste Bank,
Italy's UniCredit and Intesa Sanpaolo, and
German-owned MKB Bank.
Levente Kovacs, chief secretary of the Bank Association,
told a news conference that the bank sector would be able to
bear new losses because its capital adequacy ratio was among the
best in Europe. But he said it was too early to estimate the
potential costs of the new measures.
"The bank sector will operate in a stable and predictable
way in Hungary with any burden," he added when asked about the
potential costs of new measures.
Kovacs also said any potential conversion of the foreign
currency loans should be carried out at the same time as the
other measures that aim to help borrowers.
"According to the opinion of the Bank Association, the
settlement (of claims) should be carried out together with the
conversion, as there is no point in separating the two
(issues)," Kovacs said.
While the measures will again hit the bank sector,
potentially deterring fresh lending, they could also remove a
problem that has haunted Hungarians for years, weighing on the
Earlier on Friday, the European Commission said Hungary
should aim for foreign currency legislation that would not pose
a threat to financial stability.
"The mission took note of the government's efforts to
address the issue of foreign currency mortgage loans, but
insisted on the need for a consultative approach and appropriate
burden sharing between stakeholders on any government decision,
in order to avoid moral hazard and endangering financial
stability," the Commission said in a statement.
($1 = 0.7331 Euros)
(Reporting by Krisztina Than; Editing by Ruth Pitchford)