An ad hoc Parliamentary sub-committee established to uncover the reasons for the marked increase in retail forex debt in 2002-2010 heard testimony from the governor and former governor of the National Bank of Hungary (MNB) on Thursday.
Hungary's previous governments as well as the financial market watchdog at the time did practically nothing to prevent the growth of foreign currency-denominated retail loans, National Bank of Hungary (MNB) supervisory board chairman and former governor Zsigmond Járai told the committee. The MNB, the International Monetary Fund (IMF) and other international organisations repeatedly warned the previous governments of the problem presented by the big stock of retail forex loans, he added.
MNB governor Andras Simor told the committee that the central bank had strived to limit forex lending with the available tools, namely warnings and proposals, since he took his post in 2007. Only the government and Parliament has the power to regulate such lending, not the central bank, he added.
In a statement published on its website on Thursday, the MNB said forex loans were attractive to households at the time because of their low interest rates compared to forint loans and because they failed to take sufficient account of exchange rate risks. It noted that there was an exchange rate intervention band in place when the forex loans became popular and that expectations of Hungary's entry into the eurozone were "exaggeratedly optimistic".