The government subsidy that once made the home-savings deposit products attractive to clients were withdrawn last fall. Since then, home-savings banks have had to try to find new ways to keep their head above water. Is consolidation the proper response? How can home-savings portfolios be transferred efficiently?
The Hungarian Parliament adopted a law on October 15, 2018 that terminated the government subsidy provided to the home-savings deposits. This event significantly changed the environment for the four specialized credit institutions that operated on the market at that time. The home-savings deposits were a popular saving form in Hungary as, together with the government subsidy that accrued on the deposit collected by the client on a pro rata basis, they promised a high yield for the clients; especially in the current interest rate environment we experience nowadays.
The termination of the government subsidy for new contracts made these products far less appealing to the clients. As the sale of these products dropped significantly over night, home-savings banks needed to re-evaluate their business models and assess if the size of their current portfolio could guarantee feasible operations. Aegon Lakástakarék, the home-savings bank of the Amsterdam-based Aegon Group, being the smallest player in the market that time, concluded that its portfolio should be put on the market.
Home-savings banks are specialized credit institutions whose scope of operation is much narrower than that of normal banks; basically their activity consists only of collecting deposits and investing the collected money. The transfer of these portfolios thus is burdened with heavy licensing requirements imposed by the regulator. Not only is the transfer of the portfolio itself subject to the approval of the National Bank of Hungary (MNB), but the prospective buyers are also expected to have a valid Hungarian license for this special activity. Furthermore, as only a few players are active on the market and the barrier is high for other actors to enter this narrow stage, the assessment of any transfer from a competition law perspective is also difficult.
Apart from the licensing requirements, there are many large-scale, complex legal problems arising from the sale of a home-savings portfolio; e.g. the hands of the parties are tied by the provisions of consumer protection, as the clients are private persons exclusively. The same fact means that GDPR must also be adhered to when contemplating how the client’s data should be transferred from one credit institution to another.
In the framework of the present article it is not possible to list and introduce all such legal problems exhaustively. To illustrate the complexity of the matter, the provisions of the Hungarian Civil Code on the transfer of contracts, sale and purchase of deposits and assignment of claims will be compounded by the home-savings regulation, which is of a more technical nature, and all of the aforementioned with the terms of the underlying agreements. This requires a thorough due diligence in all cases. The guidelines of the MNB will also need to be taken into consideration when setting up the structure of the transaction, besides the provisions of the banking laws. All of these are complicated by the specific rules applicable to the different areas of law depending on the feature of the transaction (e.g. the aforementioned data protection and consumer protection).
The final structure of the transaction is finally realized in the form of separate but closely connected contracts that have been developed to address all of the aforementioned factors and also guarantee the smooth transition of service providers for the clients. The harmonization of such contracts is a particular challenge even at the stage of preparation of the first drafts, but the more difficult part is maintaining balance throughout the negotiations.