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Banking Association is open to cooperate with the government on key objectives

Hungary's banks are not yet familiar with a proposal the National Economy Ministry said it would make to them, but they are open to cooperation, Hungarian Bank Association chief advisor János Müller told MTI on Friday.

The National Economy Ministry said early Friday that the government wants to reach an agreement with the Hungarian Bank Association that does not have a negative effect on the budget. The agreement should present a solution to the problem of troubled borrowers with foreign currency-denominated loans, it should raise demand among banks for government securities, support SME financing, see the start of a home creation programme, restore euro-based lending and promote long-term savings.

Banks consider it important that structural reforms be implemented by the government, and that there be a very good cooperation between the government and banks, Müller said. They are open to proposals and trust that professional consultations will take place after those proposals are made, he added.

Banks are not opposed to the return of euro-based lending, he said.

Foreign currency-based loans were once more popular than forint ones in Hungary. Even after the introduction of tighter conditions on borrowing in foreign currency and a ban on foreign currency-denominated home mortgages last summer, the share of foreign currency denominated loans in the total was still 65.7% at the end of February, down just 1.5 percentage point from a year earlier. The ratio peaked at over 69% in the first quarter of 2009.

Retail borrowers with Swiss franc-based mortgages saw their repayments rise as the forint weakened during the crisis, prompting Hungary's previous government to introduce a moratorium on evictions by lenders. The moratorium, which has been extended several times before, is set to end on April 15, 2011. Some experts say the end of the moratorium could affect as many as 100,000 properties.