Early repayment scheme no threat to OTP Bank, says CEO


OTP Bank's capital adequacy ratio would remain well over the requirement even if all of its clients were to avail of an early repayment scheme for foreign currency-denominated mortgages, Sándor Csányi, chairman-CEO of OTP Bank, Hungary's biggest commercial lender, said at a presentation organized by the Spin-Off Klub late Monday.

About HUF 548bn of OTP Bank's HUF 1,200bn in home loans are denominated in foreign currency. Even if all of the bank's clients were to repay their forex loans under the scheme, OTP Bank's Tier 1 capital adequacy ratio would be 13%, well over the requirement, he explained.

Under the scheme, to be launched in days, Hungarians may repay their foreign currency-based loans in full at a discounted exchange rate. Banks are to cover the cost of the difference between the fixed exchange rate and the market rate.

OTP Bank lobbied against foreign currency-denominated lending early on, but foreign-owned banks successfully pushed for a level playing field for the practice which was their only way onto the market, Csányi said.

"We judged foreign currency-based loans to be risky, and I did every to lobby against foreign currency-based lending," Csányi said at the presentation in Budapest's Corvinus University. "And everybody thought I was doing it to protect OTP's position," he added.

Foreign currency-based loans slowly became the most popular lending product in Hungary after their introduction a decade ago, outpacing growth of forint loans, which had much higher interest rates, by the mid-2000s. Since then, the weakening forint has left many Hungarians with higher repayments they cannot afford to pay.

Csányi said there was no other point of entry onto the Hungarian market for foreign-owned banks but for foreign currency-based loans.

"Competition is necessary, but the appropriate scale of business is also needed. Exaggerated competition leads to bad judgment," he said.

Csányi said Hungary's economy is too small for 38 banks.

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