Govt expresses disapproval of Erste Bank Hungary’s cutback

History

Hungary’s National Economy Ministry on Friday expressed its disapproval of Erste Bank Hungary’s decision to reduce its activity in Hungary after generating about HUF 60bn in profit over a decade and playing a leading role in foreign currency-denominated mortgage lending.

Erste Bank Hungary said earlier Friday it would lay off 400-450 staff and close more than 40 branches early next year. It blamed the steps on the economic crisis as well as the bank levy and a government scheme that allows early repayment of foreign currency-denominated mortgages at discounted exchange rates that makes banks cover the difference.

The ministry noted that Erste Bank had not waited to take the steps before talks between the government and the Hungarian Banking Association wind up. The government continues to aim to provide a clear, transparent and viable "escape route" from the forex crisis for banks, the government, forex borrowers, companies and local councils, it added.

The ministry acknowledged the responsibility of borrowers, the state and lenders in creating the problem of forex lending, but it called the just sharing of the burden "of primary importance" and said an imbalanced contribution to a solution was unacceptable, especially for a bank that controlled about one-fifth of the forex mortgage market in its heyday.

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