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Rogán: FX law to set exchange rate below market rate

MNB

The new law on foreign exchange loans would force banks to value the forint below market rates when compensating borrowers who were burned by the drop in Hungary's currency, Antal Rogán, governing Fidesz' parliamentary group leader, told Hungarian television channel Duna TV yesterday.

Rogán emphasized that banks should shoulder most of the losses caused by foreign exchange fluctuations, but added that borrowers should also bear part of the burden, saying that the party “envisages the exchange rate somewhere between the rate at which the loans were disbursed and the current (market rate).”

This means the law would nail down the rate somewhere between the HUF 309 per euro that was quoted late yesterday and the rate of HUF 230 per euro that prevailed in mid-2008, when the financial crisis began.

Rogán yesterday repeated the words of Prime Minister Viktor Orbán, saying that the government might also seek to contribute to the costs incurred by banks and borrowers due to the forint fluctuation. The proposed bill is expected to be passed in Parliament on Friday, but the details of how much banks would have to pay are to be outlined in a second law, set for release in autumn.

Banks would be left 90 days to redraft loan contracts using the mid-rate of the National Bank of Hungary (MNB), and to compensate the customers for using “unfavorable” exchange rates for loan disbursements and repayments, Rogán said yesterday.

The central bank of Hungary estimates the compensation would cost local banks between HUF 600 billion and HUF 900 billion, about twice as much as analysts' initial estimates, but it will not risk the financial stability of banks, MNB Vice Governor Ádám Balog told daily Magyar Nemzet over the weekend.

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