ADVERTISEMENT

MNB starts euro sales to support conversion of delinquent fx loans

MNB

The National Bank of Hungary (MNB) is to begin euro sale operations to convert non-performing foreign currency loans delinquent for more than 90 days into forint for credit institutions.

The MNB thus wants to reduce the demand for foreign currency in the market and prevent potential adverse macroeconomic effects, an announcement of MNB said on Tuesday.

Preliminary estimates suggest that the total amount of fx loans affected by the operations may be at most €440 million, however, the amount actually converted in the operations is expected to be significantly lower. Consequently, the overall effect of the operations on the central bank's foreign exchange reserves is likely to be materially smaller than that of the euro sale tenders related to early repayments of foreign currency loans, MNB said.

The operations will have no material impact on Hungary's external vulnerability, it added.

Under the terms of an agreement between the government and the Hungarian Banking Association of December, 2011, as well as the new regulations on fixing of exchange rates for repayments of fx loans and forced sales of residential property, financial institutions are required to convert foreign currency loans of borrowers delinquent for more than 90 days into forint loans and forgive 25 per cent of their claims.

In view of the success of the euro sale tenders related to the early repayment scheme, the market’s favorable reception as well as the strong take-up of the facility, the Monetary Council has decided that the MNB will conduct euro sale operations between 15 May and 15 June to make available for credit institutions the foreign currency needed for the hedging arising from the loan conversions, the announcement explained.

The MNB will be ready to provide foreign currency for institutions up to the total amount outstanding of their fx loans to be converted into forints, including amounts forgiven. These institutions will be able to purchase from the Bank the amount of foreign currency required to meet their statutory conversion obligation in the period from 15 May to 15 June by conducting spot foreign exchange transactions, with the total amount subject to conversion spread out evenly over trading days.

ADVERTISEMENT

MKIK: Local business tax should be maintained Analysis

MKIK: Local business tax should be maintained

Parl't votes to phase out savings coops integration framewor... Parliament

Parl't votes to phase out savings coops integration framewor...

Roche Szolgáltató appoints P&C business partner lead Appointments

Roche Szolgáltató appoints P&C business partner lead

Capital sees urban exodus during pandemic City

Capital sees urban exodus during pandemic

SUPPORT THE BUDAPEST BUSINESS JOURNAL

Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.