MNB to provide €9 bln from reserves for FX loan conversion
The Monetary Council of the National Bank of Hungary (MNB) decided yesterday to provide €9 bln from its international reserves to meet banks' demand for foreign exchange related to the conversion of retail FX loans into forint loans, the MNB said.
The MNB wants to help banks acquire the necessary foreign currency from the MNB rather than from the market – as mass conversions on the market might impact the forint's value. Accordingly, the bank will extend its existing foreign exchange sales program, launched late in September, in which it allocated €3 bln from its foreign reserves to meet demand for the settlement of refunds due borrowers under summer legislation.
The Hungarian government plans to phase out retail foreign exchange loans – converting them into forint loans – next year, as a third step in recent legislation helping troubled borrowers. The central bank sees the need to establish a formal framework for cooperation with banks in the process of the FX loan conversion. FX-denominated loans made up 53% all outstanding retail loans.
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