Hungary’s government signed a deal with nine commercial banks to ease the exchange rate risks of borrowers who took out loans in foreign currency and now face an increased risk, Finance Minister János Veres said.
Foreign currency borrowing has grown dynamically in Hungary and several other countries in eastern Europe in the past years and about 90% of all new household loans in Hungary are now in foreign currency, mainly in euros and Swiss francs. Veres said the aim was to mitigate the higher exchange rate risks households were facing amid the global financial crisis, which drove the forint to all-time lows versus the euro last month.
The deal was signed with Hungary’s biggest lender OTP, Erste Bank, Raiffeisen, KBC’s Hungarian unit K&H Bank, UniCredit, MKB, mortgage bank FHB, CIB and Magyar Takarékszövetkezeti Bank. Under the agreement, borrowers will have the option to ask for an extension of the duration of their loans without having to pay an extra fee if there is a significant rise in their monthly repayments. They can ask for a conversion of their foreign currency loans to forint-denominated loans and if this happens before the end of the year, banks will not charge fees related to the conversion. Borrowers who face difficulty in repayment, especially those who lost their job, can ask for a temporary easing of their repayment obligations. (Reuters)