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MFB acknowledges possibility of “theoretical” losses, but says reserves are appropriate

The state-owned Hungarian Development Bank (MFB) confirmed in a statement sent to MTI that state exchange rate guarantees to be called down if the forint weakens to around 300 to the euro for a longer period of time would cause about HUF 100 billion in losses “in principle”, but it noted that market experts and organizations believe such a weak rate is unrealistic and that its reserves are appropriate for risks.

The MFB acknowledged that, under regulations in place since 2001, it would call down exchange rate guarantees of about HUF 100 billion on resources for lending it borrowed on international money markets if the forint/euro rate were to “stabilize” around 300. But it said an independent auditor as well as market watchdog PSZAF had earlier established that the bank's reserves were sufficient for its secure operation, thus its continued lending activities do not threaten the 2010 deficit target.

The MFB said its stock of loans grew to HUF 832 billion at the end of 2009 from HUF 710 billion twelve months earlier. Total assets reached HUF 1,135.9 billion on December 31, 2009. The bank had pre-tax profit of HUF 2.6 billion in 2009. It paid the state a HUF 12 billion dividend from the 2009 profit as well as profit reserves.

The MFB signed contracts for new loans of HUF 32.9 billion in Q1 2010, in line with the target. (MTI-Econews)