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Hungary’s gov’t to soften bank aid conditions

Hungary's government plans to soften its bank rescue bill to make it more palatable to banks who said the attached conditions were too tough, finance ministry officials confirmed.

The comments followed a report on news portal index.hu that said parliament's budget committee had discussed proposals aimed at softening the rules and that the government supported the motions.

Hungary is seen sliding into recession next year and its economy may badly need state support for the banking sector if lending activity slows down drastically.

Earlier this month, the government proposed a HUF 600 billion ($2.96 billion) rescue package to provide liquidity.

Analysts have said that the package was primarily designed to help the country's biggest bank, OTP, which does not have a controlling foreign owner like other banks.

OTP has said that it had no need for cash in 2009.

Its Chief Financial Officer, László Urbán, said that the government's proposal in the rescue bill to take control of banks that are given state support was unnecessary as domestic banks were not facing bankruptcy and only need liquidity.

One of the modifications backed by the budget committee would cut out a clause from the bill, which would allow the state to convert dividend preference shares, received in exchange for a capital injection, into voting shares.

Other motions would limit the veto rights given to the state in the banks to which it grants aid, and would allow a bank to appeal to court against a state attempt to take over its management as the price of a capital injection. (Reuters)