MNB: FX loan conversion to take place in one go

MNB

The National Bank of Hungary (MNB) is well prepared for the conversion of retail FX loans into forints and the conversion could be carried out in one step, rapidly and in an organized manner, the central bank announced yesterday.

The MNB signed contracts with all its larger partner banks and also signed an agreement with the Hungarian Banking Association under which banks would acquire the FX necessary for the planned conversion from the MNB and not from the market.

The Economy Ministry said yesterday that retail FX loans denominated in foreign currency will be converted to forint-based loans at the average exchange rate based on the supreme court's relevant decision this summer, or at the central bank's rate on November 7, 2014, whichever is better for the borrower.

The MNB said it would launch regular FX sales tenders in order to provide banks with FX for the loan conversion by extending its recently launched tender instruments; the first such tender will be held on November 10.

The necessary foreign currency for the conversion would be provided in euros, available at the MNB's latest official exchange rate posted at the time of the tender. The MNB Monetary Council set aside €9 bln in its reserves to provide banks with the FX necessary for the conversion by extending and slightly amending FX sales tenders it launched in connection with the refunds banks must make to borrowers under the summer legislation.

Economy Minister Mihály Varga informed Hungarian news agency MTI yesterday that the government would submit a bill on the details of the forint conversion to parliament this week, along with the motion recently referred to as the “fair banking” proposal. The minister added that the conversion into forints would apply to mortgages denominated in euros, Swiss francs and Japanese yen, and that it will be up to borrowers whether they want to convert their FX loans into forints.

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