Kúria rules on fx loans: All risk borne by borrower

Issues

The Kuria, Hungary's supreme court, said foreign currency-denominated loans were in line with the law and FX loan contracts were valid in a legal uniformity decision on Monday.

The borrower bears the burden of risk of exchange rate changes in such contracts, the court's civil department said.

The forint firmed from around 301 to past 299 against the euro immediately after the much anticipated decision was announced.

The share price of OTP Bank, Hungary’s biggest commercial lender was up almost 4% after the announcement.

Civil department head György Wellmann said borrowers had enjoyed the benefits of low interest rates when they took out the forex-based loans, thus it follows that they should also bear the effect of exchange rate changes. He said that the harmful consequences of the drawn out economic and social problems which result in court cases involving forex loan borrowers could not be handled exclusively on a legal basis. A solution cannot be expected only from the courts, he added.

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