Forex loan legislation to provide incentives for banks

MNB

A last-minute amendment to legislation assisting Hungarians with foreign currency-denominated loans gives lenders an incentive to forgive part of borrowers’ debt.

The legislation, approved by Parliament this morning, lifts most restrictions for participation in an exchange rate cap scheme. Under the scheme, borrower repayments are capped based on a fixed exchange rate. The difference resulting from the disparity between the fixed rate and market exchange rates is placed in a separate account for repayment later. 

According to the amendment to the legislation, submitted shortly before the vote, the state will undertake a guarantee on the separate accounts established in future only if the forex-based loan does not exceed 95% of the value of the property mortgaged.

“The aim of the proposed amendment is to give an incentive to financial institutions that forgive part of the debt of distressed borrowers with fx loans,” according to the justification for the bill published on the official website of Parliament.

“Financial institutions have the chance [to take such action] considering they have already set aside provisions for up to 30% to 40% of debts,” said the bill’s author, Fidesz parliamentary caucus leader Antal Rogán.

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