July 10, 2014 / 1:47 PM / in 4 years

Hungary's new loans legislation credit negative to banks -Moody's

BUDAPEST, July 10 (Reuters) - Hungary’s new bill on bank loans is credit negative for its banks who will have to pay up to 2.6 billion euros in compensation to borrowers, rating agency Moody’s said on Thursday.

The payments could reduce the average capital adequacy ratio of the banking sector to 12.5 percent from 17.4 percent at the end of last year, said Simone Zampa, the agency’s Vice President for banking, in a note.

Hungary’s parliament passed a bill on Friday which said the exchange rate spread applied in foreign currency loan contracts - the practice of banks using different rates when disbursing loans and when calculating monthly repayments - was void, and unilateral interest rate and fee rises in consumer loan contracts were unfair. (Reporting by Sandor Peto and Krisztina Than)

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