The size of an extraordinary tax on financial sector companies is keeping banks from contributing to a recovery from the crisis, National Bank of Hungary deputy-governor Júlia Király said at a conference in Debrecen on Friday.
The high bank levy has made the profitability of Hungary’s banking sector the worst in Central Europe “and it is thus not capable of contributing to a recovery from the crisis”, Ms Király said. Many countries have come to see bank taxes necessary for the establishment of crisis prevention funds, but the bank levy in Hungary is about ten times the size it should be, she added.
The period the bank levy is to be in place is also a cause of uncertainty, she said. “They said two years, then they extended it for a third. After that, what guarantee is there that they will not extend it for a fourth too,” she added.
Economic stability reduces the country’s risk premium, but to achieve this, the bank levy must be reduced, the moratorium on evictions must be lifted while at the same time creating a law on rental flats, and foreign currency-denominated lending must be allowed again under new rules, she said. Lifting the moratorium would allow banks to clean up their portfolios, and a rental home law would ensure that nobody who is evicted ends up on the street, she added.
Retail borrowers with Swiss franc-based mortgages — more popular than forint mortgages before they were banned — saw their repayments rise as the forint weakened during the crisis, prompting Hungary’s previous government to introduce moratoriums on foreclosures and evictions by lenders. The moratorium has been extended several times, most recently until July 1, 2011.
A stable and predictable economic policy is also necessary for the banking system to contribute to corporate lending and support the start of economic growth, she said. Instead of converting foreign currency-based loans into forints, households’ income position ought to be improved through the creation of workplaces, and excess risk premiums ought to be reduced, she added.
“It is not the CHF-euro rate but the lack of economic stability and [Hungary’s] risk premium that is the cause of the situation,” she said.
Producing journalism that is worthy of the name is a costly business. For over 30 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.
