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Hungary: FHB to maintain group lending

  FHB Bank it will use the state loan to grant retail (home) and SME loans, and will maintain its consolidated loan portfolio under an agreement for a €400 million state loan signed on Wednesday, the bank said on the website of the Budapest Stock Exchange on Thursday.

Finance Minister János Veres announced late Wednesday the state will provide a loan of more than HUF 400 billion to OTP Bank and a loan around HUF 120 billion to FHB Bank with the aim of boosting domestic lending.

The loan will expire on November 11, 2012 and will be repaid in eight equal quarterly installments after a grace period ending in November 2010.

The loan will be granted via the Government Debt Management Agency (AKK) from an IMF loan facility available to Hungary. The loan will carry a market interest rate -- of EURIBOR plus spread or EUREPO plus spread plus a spread correction factor, whichever is the higher, and market conditions, FHB said.

AKK CEO Ferenc Farkas said Wednesday that, both the OTP and the FHB loan will be disbursed in two tranches, and the first tranches are due to be disbursed soon. FHB undertook to keep its lending stock at the December 2008 level, and also agreed to issue mortgage bonds of at least HUF 10 billion at least one occasion in the year from the agreement, FHB Mortgage Bank CEO Daniel Gyuris told the press late on Wednesday.

FHB also undertook to propose state representatives on the board of directors and on the supervisory board if the mandates of the board members representing the Hungarian state end before the expiration of the loan.

When announcing the loan, Veres said that a recent amendment to the law on general government made possible lending from the state's free cash resources to credit institutions based in Hungary.

The government is making significant efforts to prevent the credit shortage from further undermining the operating conditions of the economy, Veres said. Foreign parent banks do not plan to reduce the lending activities of their Hungarian units, and they even see room for some expansion. The government now aimed to support an expansion of lending from those banks which have no foreign parents, the minister said. (MTI-Econews)