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Banks want agreement with government on assistance for troubled foreign-currency borrowers

Hungarian banks want to reach an agreement with the government on assistance for troubled foreign-currency borrowers, Hungarian Bank Association General Secretary Rezso Nyers told MTI.

There is no alternative to negotiations and a "good compromise" is always achievable, Nyers said following newspaper reports that banks rejected a fresh draft of an agreement with the government on Wednesday.

The government sent an expanded and reworked draft of the agreement to banks last Friday, but the board of the Hungarian Bank Association and banking heads returned it, favoring the earlier draft, the daily Népszabadság said.

Retail borrowers with Swiss franc-based mortgages -- more popular than forint mortgages before they were banned -- saw their repayments rise as the forint weakened during the crisis, prompting Hungary's previous government to introduce moratoriums on foreclosures and evictions by lenders. The moratoriums have been extended several times, most recently until July 1, 2011.

Under a draft of the agreement with banks, the period during which the bank levy is in place is to be extended from the end of 2012 to both 2013 and 2014 at least at 50 percent of current levels.

In the earlier draft, banks were to be allowed to deduct a tiny fraction of new lending from the tax. In the fresh draft, allegedly rejected by banks on Wednesday, the deduction was to come from the base for the levy, which would have meant banks saved practically nothing, the paper said.

In the fresh draft, the government set the maximum HUF/CHF exchange rate for troubled borrowers at just 160, compared to 190 in the earlier draft. Both rates are well under the current rate of around 210 forints to the Swiss franc. The forint rate should be set at 250 to the euro, compared to 265 in the earlier draft and to present market rates around 268.

Following Wednesday's reports, the forint dropped to an 8-week low of 269.85 against the euro, but recovered to 268.32 by Wednesday evening and traded at 268.11 to the euro Thursday morning.

In the earlier draft, banks were to be limited to auctioning 5% of their foreclosed properties portfolios per quarter after a moratorium on evictions and auctions is lifted. In the fresh draft, the per-quarter limit was to be set at 1% in 2011, 2% in 2012, 3% in 2013, 4% in 2014 and 5% in 2015.