UPDATE 1-Hungary to convert remaining FX loans into forints -govt

* Stock of loans affected worth about a billion euros

* Conversion, agreed with banks, to take place at market rates

* Central bank offers to provide required foreign currency

* Borrowers to get rebates for some exchange rate weakening (Adds minister’s quotes)

BUDAPEST, Aug 19 (Reuters) - Hungary’s government has decided after talks with local banks to convert outstanding foreign currency-denominated car and consumer loans worth about a billion euros into forints, the economy minister told a news conference on Wednesday.

Prime Minister Viktor Orban’s government already converted a large stock of forex mortgages into forints late last year, saving borrowers and banks from the fallout seen elsewhere in the region after the Swiss franc’s surge.

Mihaly Varga said the conversion of about 305 billion forints ($1.09 billion) worth of the loans, most of which are denominated in francs, would take place at market exchange rates, involving 229,000 loan contracts.

Varga added that the measure, which was approved after talks with the Hungarian Banking Association and the National Bank of Hungary, would cut the stock of foreign currency retail loans to just 3 percent from 54 percent before the conversions started.

“We will manage to relieve families of the risks that foreign currency loans and exchange rate volatility have posed over the past years,” Varga said, adding that the process could conclude by the end of the year.

The central bank, led by Orban’s former economy minister, Gyorgy Matolcsy, said separately that it would provide banks with the foreign currency needed to handle the conversions, in line with a pledge it had made earlier.

Varga added that borrowers would get rebates worth some 31 billion forints to compensate them for some of the exchange rate weakening.

The relief will be shouldered equally by the government and lenders, who will be allowed to reduce their 2016 and 2017 tax bills by a corresponding amount.

The minister said interest rates on the converted loans would be fixed, adding that the government would submit the required legislation to parliament in September.

About half of Hungary’s banking sector is foreign owned, with the biggest players including home-grown OTP, Austrian Erste Bank and Raiffeisen, Belgian KBC Group and Italian Intesa SanPaolo and UniCredit. ($1 = 280.14 forints) (Reporting by Gergely Szakacs; Editing by Toby Chopra)