Hungary's Volksbank, a unit of Volksbank International AG (VBI), has imposed limitations on the issuance of Swiss franc and US dollar loans in Hungary, the bank said in a statement.
Volksbank's announcement comes after MKB Bank, a unit of Bayerische Landesbank, said on Monday that it had suspended the issuance of foreign currency loans in Hungary.
“(Volksbank) has introduced limitations on new CHF and USD based loans considering the volatile market,” Volksbank said.
Nearly 90% of new household loans were made in foreign currencies this year in Hungary and analysts said a limitation on such lending could sharply slow banking activity.
Volksbank said it would continue providing foreign currency loans, particularly euro-based lending.
Volksbank is the 14th biggest bank in Hungary based on total assets.
MKB said it had suspended the issuance of foreign currency loans to protect clients from currency swings.
Other Hungarian banks have said they are monitoring the situation.
Analysts said the global credit crunch may lead western banking parents to end robust financing flows to their units in central Europe, while the weakening of currencies worsens the quality of existing foreign currency loan portfolios.
“Exposure to the credit squeeze is visible via rising cost of foreign capital and increasing roll-over risk of foreign liquidity,” Commerzbank analysts said in a note.
“A large share of bank assets-to-GDP, high loan/deposit ratio and large share of foreign funds within banks' total external funds indicates high degree of vulnerability in the Baltic countries and Hungary,” it added. “In addition, liquidity for FX-linked lending is typically created via FX-swaps, which currently threatens to seize up.”
On Tuesday Millennium and PKO BP, two of Poland's top home loan lenders, said they would tighten rules for new mortgages due to the rising cost of money and fears that the global turmoil may sap economic growth at home.
Millennium said it would ask for a 35% downpayment for popular Swiss franc-denominated home loans, which would halt the growth of its mortgage portfolio.
PKO, Poland's largest mortgage lender, also confirmed it would ask new clients to put up 20% of the value of property when borrowing in francs. (Reuters)