BUDAPEST Dec 13 Hungary's top court is unlikely
to issue the kind of ruling on the legality of foreign currency
mortgages weighing on hundreds of thousands of households that
would cripple the banks who issued them, financial law experts
But they said the court, which holds a news conference on
Monday, may find fault with some aspects of the way the costs of
the loans were calculated and administered.
That could lead to the banks, mostly foreign-owned, paying
back some cash to borrowers.
Prime Minister Viktor Orban, fighting for re-election early
next year, wants banks to ease the burden on the many households
left with huge debts after the home loans they took out in
foreign currencies ballooned as the Hungarian forint sank.
The government says it wants the court, known as the Kuria,
to rule on the issue, clearing the way for a government-imposed
Banks operating in Hungary, including units of Raiffeisen
, Unicredit and Erste Bank, fear
the court ruling could provide the basis for new measures to
help borrowers at the expense of the banks, which posted losses
of over 1 billion euros after a 2011 government-imposed relief
The court will examine whether the loans - denominated in
Swiss francs or euros but disbursed and repaid in forints - are
indeed foreign currency loans. If it rules they are not, that
could be grounds to declare them invalid.
That would be the worst outcome for the banks, although the
financial experts said that was unlikely.
"I don't think it is realistic to expect the Kuria to
declare the contracts null and void," said Tamas Banfi, a former
central banker and now head of the Faculty of Finance at
Budapest's Corvinus University.
"This is a financial question: The source of the loans was
foreign currency and not forints," he also told Reuters.
Zoltan Bodnar, an associate professor of financial law at
Budapest's ELTE University, also said he did not believe there
were grounds for the court to rule the loans were invalid.
The court is scheduled to hold a news conference at 12:00
GMT on Monday. It is not clear if the court would be announcing
its final ruling on the forex loans.
While it is unlikely to rule that the loans are invalid, it
may go against the banks on smaller points, the experts said.
These include the question of the spread, the difference
between the rate at which foreign currency is bought, and the
rate for which it is sold. Typically, the spreads applied by
banks are a small fraction of the monthly repayments.
In a case involving OTP Bank, the country's
largest lender, the Kuria in July ruled that the spread was a
cost and should have been defined in the contract - and it
ordered the bank to repay some of the money.
Another issue open to interpretation by the court is whether
the conditions in the contract allowing the banks to make
unilateral modifications to the loan, such as increasing the
interest rate, were made clear to clients.
If the court rules against the banks on this point, they
could have to pay back the interest rate rises. Still, Bodnar
said it was unlikely the judges would find the changes were not
"I believe the Kuria, acting responsibly, cannot say that
the contractual terms which allowed unilateral changes in
interest rates... were unfair and thus invalid," he said.
(Editing by Hugh Lawson)