An agreement in December between banks and the government on improving the situation of retail borrowers with foreign currency-denominated loans appears to be restoring confidence, Hungarian Banking Association deputy chairman Daniel Gyuris said at a press conference on Tuesday.

All banking sector players have been able to meet demand generated by an early repayment scheme, and the government has completed its tasks in the area of legislation, Mr Gyuris said. The association will draw up proposals aimed to boost SME and retail mortgage lending by the end of January, he added.

He said more than 20% of borrowers would take advantage of the early repayment scheme, under which borrowers enjoy discounted exchange rates. Banks will rack up a HUF 300bn loss on the scheme, but the related write-offs from the bank levy will come to about HUF 100bn, he added.

Taking into account the loss of good clients and an average 15-year loan maturity, the scheme will take HUF 500bn from future profits, he said.

Mr Gyuris said the banking association continues to take the stand that the question of local council debts is one that has to be addressed at bilateral talks between banks and local councils.