Burden of fixed-rate fx loan repayment is shared; presents no systemic risk - PM says

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The burden of a proposed plan by MPs of governing Fidesz-KDNP that would allow Hungarians to repay their foreign currency-denominated mortgages at a fixed rate in one installment is shared between borrowers and banks, and the plan presents no danger to the banking system, Prime Minister Viktor Orbán told Parliament on Monday.

The cabinet discussed the proposal on Sunday and found it legally sound, Orbán said. Legislation allows Parliament to amend mortgage contracts, he added.

Borrowers who took out loans below the proposed fixed rates -- HUF 180 to the Swiss franc and HUF 250 to the euro -- stand to lose, while banks stand to gain, he said, explaining that the HUF/CHF rate was 150-165 when many of the loans were taken out.

Foreign-owned Hungarian banks have their parent companies to rely on, and the Hungarian state stands behind OTP Bank and FHB, Orbán said.

Addressing the possibility the plan could prompt foreign banks to cut on loans to their Hungarian units, Orbán said these foreign parent banks have already cut back on financing of their local units, and lending has dropped.

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