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MNB sells lenders €2.5 bln of euros to support early FX repayment

Lenders made €2.489 billion of euro purchases from the National Bank of Hungary (MNB) to cover early repayments of foreign currency-denominated mortgages during a government scheme that wound up at the end of February, fresh data from the central bank show.

Lenders made €921 million of the euro purchases in February alone, the data show.
At the beginning of October, the MNB started selling banks euros for forints in a series of weekly tenders aiming to give lenders the necessary FX liquidity for the scheme, which allowed early full repayment of forex retail mortgages at discounted exchange rates. It held the last tender on Februry 27, with all settlements closed by March 8.
The euro purchases accounted for €2.5 billion of the €4 billion reduction in the MNB's international reserves between the launch of the scheme, on September 29 and the end of February.
The reserves fell to a twelve-month low of €34.77 billion at the end of February. Alone in February, the reserves declined by €2.5 billion. In addition to the €921 million of euro purchases during the month, a quarterly repayment on a loan from the International Monetary Fund that Hungary took out at the height of the financial crisis reduced the reserves by about €620 million.
Between October and the end of February, the MNB accepted total offers for €2.679 billion or HUF 10 billion from lenders in the euro tenders. However, settlement did not take place until repayment; thus, actual purchases of euros by banks were lower.
In February alone, the central bank accepted offers for €335 million or HUF 99 billion in the tenders. It actually sold €921 million or HUF 279 billion, the largest amount during any month of the scheme.
The data suggest lenders used the purchases to cover a bigger proportion of their FX need generated by the scheme. The proportion was 44% in the period till the end of January, but reached 50% in the month of January alone.
Repayments under the scheme came to HUF 1.073.7 billion, at market rates, between October and January, according to data by financial market watchdog PSzÁF. Borrowers repaid just HUF 776.0 billion during the period, because of the discounted exchange rates, and PSzÁF said they would repay another HUF 145 billion in the last month of scheme.
PSzÁF will release final data on the scheme on Tuesday.