Moody’s lowers ratings on Erste Bank, FHB Bank

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Moody's Investors Service downgraded the deposit ratings of both Erste Bank Hungary and FHB Mortgage Bank to B3 from B2, the ratings agency announced today. It says it maintains a negative outlook for both banks.

The agency sees an "increased risk of losses" resulting from the recently adopted borrowers' relief legislation and an "ongoing negative pressure on [...] financial fundamentals".

Moody’s believes the two banks are more affected by the new legislation than any other one in Hungary because they have a “more limited profitability".

In an earlier report, Moody's estimated the impact of the borrowers’ relief legislation on the whole banking sector at €2.6 bln, i.e about 28% of its total capital. However a top central bank official said the refunds to be paid to customers would cost Hungarian banks HUF 900 bln at the most.

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