BUDAPEST, Jan 18 (Reuters) - Hungary’s banks and borrowers will have to negotiate over the spiralling cost of Swiss-franc consumer loans without further state intervention, Prime Minister Viktor Orban said on Sunday.
The Swiss central bank sent the value of the Swiss franc soaring with its decision last week to scrap a three-year-old cap on the currency, making loans in some central European countries much more expensive to service.
Hungary had been one of the countries most exposed to Swiss franc-donominated loans before the government took action late last year, fixing the exchange rate for conversion of euro and Swiss-franc mortgages into forints well below market levels.
Though that saves a huge mortgage loan stock of about 10 billion euros ($11.6 billion) from the impact of the Swiss franc’s strengthening, Hungarian households still have about 1.7 billion euros of foreign-currency loans, mostly in Swiss francs and predominantly car loans.
“I think banks and foreign currency borrowers must negotiate now,” Orban told public radio. “... the government can (only) play the role of mediator.”
Orban said that the courts have declared that borrowers had to bear the exchange-rate risk on the loans.
He praised National Bank of Hungary governor, Gyorgy Matolcsy, for playing a key role in the mortgage conversion programme. The central bank provided billions of euros to banks from its reserves, allowing lenders to buy the Swiss francs needed for the mortgage conversions.
“We would not be able to talk about results today without the active part and brave measures taken by the central bank,” Orban said.
Analysts have said the Swiss franc’s rise would hit Poland much more than Hungary, praising Budapest for its timely decision to convert the huge stock of mortgages into forints.
Orban, who took power in 2010 and was re-elected last year, has often faced criticism over measures that forced banks to swallow billions of euros in losses, as well as windfall taxes that hurt banks and several business sectors dominated by foreign companies.
He has said the huge special taxes were needed to keep Hungary’s budget deficit in check. ($1 = 0.8645 euros) (Reporting by Krisztina Than; Editing by David Goodman)