MBSz proposal: Write off part of forex loan debt

MNB

The Hungarian Banking Association (MBSz) is proposing writing off part of the debt of borrowers who join a scheme that caps the exchange rate for foreign currency-denominated loans, news portal Origo.hu reported yesterday.

The Origo study said the association was proposing forgiving part of the difference between the exchange rate cap and market rates. The association is also proposing allowing borrowers to join the scheme twice, rather than just once.

Under the scheme launched in May 2012, borrowers may opt to adjust their repayments to the exchange rate cap. The difference between the rate of repayment and market rates is placed on a separate account for repayment later. Interest costs on the separate account are covered in equal part by banks and the state. At present, borrowers may join the scheme for up to five years.

About 39% of eligible borrowers with forex-based loans opted to join the scheme by the end of July.

MBSz communications director Ágnes Sütő declined to comment on the Origo report when asked by national news service MTI.

The association submitted a proposal on bailing out forex loan borrowers to the government last Friday, but National Economy Minister Mihály Varga said on Monday that the proposal was no solution to the problem, noting its shortfalls without detailing the plan.

Cheap, Swiss franc-denominated loans were once the most popular retail lending product in Hungary, until the forint weakened, causing repayments to increase and putting many households at risk of default.

(For those wondering how such a write-off might work, perhaps the below-embedded video will help. Or not.)

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