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Banking association hopes govt will rethink fiscal measures affecting sector

The Hungarian Banking Association is in negotiations - on a daily basis - with the government, and hopes it will rethink the consequences of planned measures that could reduce lending stock, the professional body's chief secretary Levente Kovács said on public radio on Thursday.

National Economy Minister György Matolcsy announced on Wednesday an additional HUF 367 billion of fiscal adjustments that aim to end the European Union's Excessive Deficit Procedure against Hungary and ensure the country can avail of its full Cohesion Fund allocation. The new measures include the reversal of an earlier decision to halve the bank levy, introduced as a temporary measure in 2010, and another to increase the scale of the financial transactions duty from 0.1% to 0.2%.

Kovács said on Kossuth Radio's "180 perc" program that the association would fight to delay the introduction of the financial transactions duty by at least a quarter if Parliament approves the planned increase.

He warned that the planned measures would drastically reduce banks' ability to lend, adding that parent banks may not continue to ensure financing for lending activities. If this happens, and banks have to cut back on their corporate lending stock, Hungary's GDP could fall 10%, he added, citing the association's own analysis.

The loan-to-deposit ratio in Hungary is about 120%, requiring financing from foreign owners for lending activities, he explained.

The Hungarian Banking Association said on Wednesday that the government had violated cooperation agreements with banks by taking unilateral decisions on fiscal measures affecting the sector.