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Hungary: MNB issues yen loan warning

Governor of the National Bank of Hungary (MNB) András Simor and chairman of the finance watchdog’s (PSzÁF) supervisory council István Farkas issued a joint statement on foreign currency denominated loans, especially those loans calculated in Japanese yen.  

Clients taking their loans in Japanese yen must be very cautious, because of the rapid dynamics of loans taken in these currencies, Simor and Farkas said. Banks may prepare loan constructions with an extremely high loan risk to fulfill their growth plans. Currently the loan exceeds 70% of the collateral in more than half of the home loan cases and 90% of clients take out their loans in foreign currencies. At the end of last year 0.8% of all domestic loans were calculated in yen, but already 10% of the loans approved in December was based in yen. The major risk of yen loans is the high volatility of the currency’s exchange rates (16.4%), as against the same data of euros (3.5%) or Swiss francs (3.9%). The Ft/yen exchange rate is also very sensitive to capital market movements. For consumer protection reasons, Simor and Farkas believe banks should indicate on ads and contracts that yen-based loans are highly risky products and the installments may seriously grow due to interest and exchange rate changes. (Gazdasági Rádió)