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Govt agreement with banks could help at IMF talk - paper

History

An agreement reached earlier between Hungarian banks and the government could be of help at Hungary’s talks with the International Monetary Fund, Hungarian Banking Association chairman Mihaly Patai said in an interview in the fresh issue of weekly Heti Valasz.

The association’s members and the government reached an agreement in December on improving the situation of borrowers with foreign currency-denominated mortgages and on boosting lending to SMEs.

Hungary is seeking financial assistance from the IMF and the European Union as a precautionary measure that will allow the country to continue to finance its debt on the market.

Mr Patai said the problem of foreign currency-denominated loans could not be solved "with a single blow", rather the consolidation would take several years.

He said the government had handled the most important questions well, stopping the rise in state debt and keeping public spending under control. But he added that the government should consult with Europe’s most important actors on all important steps.

"There can be no cooperation without consultation. In this respect, governance gets bad marks. The genuine return to the IMF will hopefully result in an important turnaround," he said.

Asked whether banks had seen bigger than usual withdrawals lately, Mr Patai said net stock of deposits continued to grow in the first week of January.

The government recently dismissed as false reports that it could freeze some bank deposits.

Mr Patai said the government should accept that there will be little or no economic growth in the coming years, not because of political parties or governments but because of global trends.

He said banks had not obstructed the process of early repayment of foreign currency-denominated mortgages under a government scheme, rather they did not have a big enough stock of forint deposits to start a lending war. He added that a rise in interest rates was in no way coordinated, but was dictated by changed economic conditions, the liquidity situation in Europe, Hungary’s risk premium and other factors.

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