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Government submits FX car, personal loan conversion bill

MNB

Hungaryʼs government submitted a bill to Parliament on Friday stipulating conditions for the conversion of foreign currency-denominated vehicle and personal loans into forints.

The government announced plans to draft legislation on the conversion of the FX for such loans in the summer. FX mortgages were earlier converted into forints by law. The bill would stipulate that the effect of the conversion is already being seen for client payments due in November or by December 1, at the latest.

The loans would be converted automatically, but borrowers would have the chance to opt out within a certain period of time. The bill would require the modified loan contracts to be no less favorable for borrowers than before the conversion in terms of interest rates, fees and other costs.

As per an agreement between the government and the Hungarian Banking Association reached in August, the bill would lock in rates for the conversion at the National Bank of Hungaryʼs euro and Swiss franc fixings on August 19, but the more favorable rates used earlier for the FX mortgage conversion would still be applied to clientsʼ balances.

The difference between the rates will be shared in equal part by banks and the state. The billʼs authors noted that consultations on the on the legislation with the European Central Bank would be required before a vote. The bill could impact as many as 200,000 families with loans of HUF 305 bln. About 30,000 of these borrowers also have mortgages. Swiss franc-based loans were once the most popular retail lending product in Hungary.

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