Lenders allowed to close some FX swap contracts with MNB before maturity

MNB

The National Bank of Hungary on Monday said it will allow lenders to close, before maturity, a certain part of FX swap contracts related to the mandatory conversion of retail FX loans into forints, Hungarian news agency MTI reported.

Banks may avail of the opportunity for up to 20pc of unconditional swaps -- for both the FX conversion and the settlement of compensation paid under borrowers relief legislation -- maturing up to March 2016. In absolute terms, the threshold comes to €1.8 bln, the central bank said.

Offering banks the chance to close the contract could accelerate their return to normal business operations and further reduce short-term external debt, it added.

The MNB allotted last November about €6.39 bln of the swaps in an unconditional facility and an additional €1.66 bln in a conditional facility. The MNB said at the time that the amount would meet nearly all of banksʼ FX liquidity needs related to the conversion.

The MNB earlier agreed with banks to provide €9 bln from its international reserves to fully meet their FX liquidity needs related to the conversion, while lenders committed to acquire the necessary FX from the central bank rather than from the market.

The central bank has also allotted €788m to banks in the unconditional and €293m in the conditional facility related to the refunds payable under borrowers relief legislation in weekly tenders it started in the middle of October 2014. The MNB said at the time it would maintain the programme in the phase connected to the settlement of the refunds at least until the end of March 2015.

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