Based on a decision by the Monetary Council, the MNB is prepared to provide the FX without conditions and allow banks to keep the amount they purchase at the central bank for up to one year.

The MNBʼs big stock of international reserves, in addition to its FX sales program, ensure international reserves will remain at an appropriate level in the long term, the central bank said.

The MNB said earlier it was in talks with the Hungarian Banking Association on converting the loans.

The MNB put the stock of FX personal and car loans at HUF 300 bln, tied to some 250,000 contracts, and warned of “cross-contamination” as the holders of those loans struggle to make repayments on their mortgages.

In a report published late in May, the MNB said that 30,000 of the borrowers with FX car loans also have a mortgage and warned that defaults on these car loans could become problematic for some HUF 230 bln of loans overall.

To mitigate systemic risks, the MNB said in the report that it is considering introducing “macroprudential tools” that would give lenders an incentive to convert such FX loans by making it more expensive to hold them, according to the report. The MNB acknowledged that such a conversion could occur at either the institutional level or by legal means, but added that the legal option would be warranted because of the often low willingness of borrowers to participate voluntarily and the administrative burden posed by leaving banks and borrowers to settle the matter on an case-by-case basis.