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Banks dismayed at government’s broken promise

Hungarian banks could withdraw a package of proposals that aim to help troubled borrowers with foreign currency-denominated loans because of a broken promise by the government, daily Magyar Nemzet reported on Tuesday.

The Hungarian Banking Association could withdraw the package of proposals because of a government measure making employer support for employees who wish to participate in an early repayment forex mortgage repayment scheme tax free up to HUF 7.5m. The measure was cleared by the government last week and approved by Parliament in spite of a promise to banks that no further measures affecting forex borrowers would be taken until talks between the government and banks wind up.

Responding to a query by the paper, the National Economy Ministry said the government seeks a joint solution to the problem posed by forex borrowers. The ministry confirmed banks had submitted the package of proposals and reiterated that the government would form its opinion on the 6-8 instruments in the package in the coming two weeks.

Asked to comment on the report by Reuters, the association said it was not pulling out of talks.

"No doubt we received a promise from the government that while the Hungarian Banking Association works out the details of its proposals and negotiations with the government end, there will not be new government measures and legislation," Bank Association spokesman Janos Muller wrote in an emailed reply to Reuters questions.

"Although such proposals and legislation have been submitted in recent days, the talks between the government and bank association continue," he added.