MNB, banking association discuss maturity mismatch in joint working group

MNB

The National Bank of Hungary (MNB) and the Hungarian Banking Association have set up a working group to discuss ways to resolve the excessive maturity mismatch between forint loans and liabilities, MNB managing director Márton Nagy said yesterday.

The issue is being discussed but no decision regarding possible solutions has been made, Nagy said when asked to comment on a recent news report that the MNB has contemplated a rule under which all mortgage loans would have to be backed by mortgage bonds in a bid to lengthen the term of the liabilities behind the loans.

The mismatch has grown with the conversion of FX retail mortgages into forint loans, Nagy said. The MNB introduced an FX adequacy measure earlier to tackle the problem for FX loans. But there are no long forint liabilities behind the forint loans, which were converted from FX loans as of February 1.

Parliament approved a law in November on the conversion of retail mortgages in foreign currency and denominated in foreign currency into forints at a near-market set exchange rate to take effect February 1. The conversion is mandatory, but borrowers may seek an exemption if their loans mature by the end of 2020, if the interest rate on the converted forint loan is higher than the original rate on their FX loan, if they have regular income in the currency of the FX loan, or if their income-to-repayment ratio exceeds the threshold allowing them to take out FX loans.

The stock of retail FX mortgages stood close to HUF 3.3 trillion or about 11% of GDP at the end of September, and about one third of them were loans expiring within five years.

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