Hungary's banks will struggle with financing in 2009

BUDAPEST, Nov 20 (Reuters) - Hungary's banks will struggle to find financing next year and their problems will likely worsen Hungary's recession, Banking Association Chairman Peter Felcsuti told a conference on Thursday.

Felcsuti added it was not reasonable to expect foreign banks to continue financing the expansion of their local subsidiaries, especially as these banks are also struggling to cope with the impact of the financial crisis.

"There is a danger than the Hungarian banking system will be the problem next year and not the solution," said Felcsuti, who is also the chief executive of Raiffeisen International's RHIB.VI Hungarian unit.

Hungary expects its economy to contract by 1 percent next year and sees a recession for up to a year and a half.

Felcsuti added Hungary's banks are on solid footing and there is no danger they would fail to meet any of their payment obligations, but their lack of access to funding will limit growth.

Hungary avoided a financial meltdown last month with the help of an International Monetary Fund-led $25.1 billion rescue package but its financial markets have continued to struggle.

The government proposed a 600 billion forint ($2.8 billion) rescue package for banks as part of the IMF deal, but parliament's budget committee earlier this week rejected the bill while OTP Bank OTPB.BU, the country's biggest bank, also said the bill was inadequate.

"We can expect foreign banks to keep pumping cash into their subsidiaries and the Hungarian economy but it's not going to happen," Felcsuti said.

"These banks have received a severe beating in the recent past, their share price is way down and analysts are also punishing them, in part because of their central European exposure," Felcsuti added.

He predicted banks would not find any significant external financing in the first half of 2009 while household savings are virtually non-existent which seriously impairs banks' ability to raise financing. (Reporting by Balazs Koranyi and Gergely Szakacs; Editing by David Holmes)