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Banking association working group for municipal loans to report soon

The Hungarian Banking Association set up a working group to review the issue of municipal loans many months before and the working group will report its findings soon, Levente Kovács, secretary general of the association said on Thursday.

Speaking on the public radio Kovács said that delaying the start of principal payments of municipal loans by one year is a theoretical possibility, although it is one of several options.

Kovács made the comment after the Hungarian Association of Local Governments (MOSz) said Wednesday they were asking the prime minister to intervene with banks in the interest of achieving a one-year moratorium on repayment of debt principal because of the firming Swiss franc. The price of insuring Hungarian state debt rose to a six-month peak after the MOSz announcement on Wednesday.

Local councils' problems and their level of indebtedness vary, therefore there is no unified solution for their problems, Kovács said.

“Each local council which has a problem must sit down with its own bank for discussions. If they find a solution there is nothing more to talk about, if not than it is worth working out common principles for tackling the problems”, the association general secretary said.

MOSz chairman György Gémesi told MTI on Wednesday that Hungary's local councils have outstanding debt of HUF 1,200 billion of which about HUF 600 billion was issued in the form of bonds in 2006-2008, but mainly in 2007. Most of the bonds had 20-year runs with three-year grace periods, thus principal payments will be due on many this year. About 85% of the bonds is denominated in foreign currency, many of them in Swiss franc.