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Foreign currency (FX) loans to be eliminated

July 2nd, 2014

As the government promises to convert FX loans into Forint credit by the end of the year, analysts wonder how the conversion could and should be carried out.

On the basis of the guidelines issued by the Kúria (see BudaPost June 18), Parliament will pass a law this week declaring two important aspects of most forex loans null and void. Exchange rate margins (accounting for 1 to 2 per cent of credit burdens) as well as unilateral interest rate changes by banks (representing approximately 20 per cent of monthly instalments) will be ruled void retroactively. Banks will have 30 days to go to court and claim that the interest rate hikes they have applied in various types of contracts were fair. In the meantime, government politicians said that FX loans will be stamped out by the end of the year through a new comprehensive law to be submitted to Parliament during the autumn session. Fidesz floor leader Antal Rogán also hinted that mortgages denominated in foreign currency will be exchanged at a favourable rate.

On Mandiner, Bea Bakó agrees that the issue of FX loans can be resolved only through retroactive legislation. The conservative pundit finds it disturbing however that the government wants to protect customers from the consequences of their own irresponsible decision of indebting themselves in foreign currencies, regardless of the risk of huge fluctuations in the exchange rates. Bakó fears that the law creates a precedent for legislation to be used to rescind any agreements which prove disadvantageous for one of the parties involved.

The government is trying to buy popularity through cheap punitive anti-bank measures, Népszava’s Miklós Bonta suggests. The left-wing columnist accuses the government of co-opting the rhetoric of Jobbik which promised to nullify all FX loan agreements. In conclusion, Bonta wonders, if FX loans were indeed unfair, why the government does not simply rule all such loan agreements null and void, rather than tinkering with the terms and conditions.

On Galamus, Tamás Bauer proposes that left-wing and liberal parties should oppose the government’s plans. The former liberal politician (SZDSZ, Democratic Coalition) acknowledges that the government has a duty to protect debtors, but he calls for a differentiated legislation which offers help only to those who cannot be held responsible for their losses, although he does not elaborate on how eligibility for such a scheme should be determined. The government should protect the legitimate interest of those Hungarians who did not take up risky FX loans, and, consequently, should minimize the amount of public money spent on helping debtors, Bauer reckons. In this way, protecting the interest of banks would actually protect Hungarians without loans as well, Bauer maintains.

Getting rid of FX loans once and for all would be beneficial both for individual debtors and for the Hungarian economy, Zoltán Kiszelly suggests in Magyar Hírlap. The pro-government analyst believes that otherwise hundreds of thousands of indebted Hungarians would eventually be evicted from their homes. Converting FX loans into Forint credit would also increase the independence and stability of Hungary’s economy, Kiszelly adds.

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