Kúria postpones decision on FX borrower vs OTP Bank

Issues

Hungary's supreme court, the Kúria, on Tuesday postponed until July 4 a decision on a case brought against OTP Bank by a client with a foreign currency-denominated loan. The borrower in the case is arguing that the cost of the exchange rate margin was not indicated in the loan contract, thus it should be annulled. A district court in the capital ruled against the borrower in April 2012, but the Budapest court of appeals ruled for the borrower in December. OTP Bank, Hungary's biggest commercial lender, then turned to the Kúria. Much of Hungarian banks' corporate and consumer lending stock is denominated in foreign currency. FX loans were earlier popular because they had lower interest rates than forint loans. A week ago, the head of the Hungarian Financial Supervisory Authority (PSZÁF) has warned of the possible economic and social impacts of court sentences related to foreign currency loans in a letter to the head of the Supreme Court council, warning that annulling such contracts or restructuring these in a "summary" manner, could, in an extreme scenario, even lead to state bankruptcy. Governing Fidesz party parliamentary leader, Antal Rogán, later said that "we have the feeling that the head of the authority (PSZÁF) is sitting on the horse backwards," adding that the head of PSZÁF should represent the interests of borrowers, and not those of the banks. In an official reaction, PSZÁF rejected allegations that it attempted to influence the court, and said that the letter written by its head was compatible with the authority's mission of expressing its legal and professional opinion regarding the provision of financial services. PSZÁF also noted that the Kúria itself had asked the authority for its opinion on legal proceedings related to foreign-currency loans. Finally, on Monday, the two deputy heads of PSZÁF, Éva Sáray and László Balogh, as well as the chairman of the Financial Arbitration Board (PBT), Géza Nadrai, have submitted their resignations. PSZÁF spokesman István Binder said the watchdog did not wish to announce the reason for the resignations. The government submitted a bill to Parliament on June 7 that would integrate PSZÁF's activities with the National Bank of Hungary. PSZÁF would be wound up without a legal successor under the bill on October 1st.

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