MNB to realise profit on FX sale to banks

Telco

The National Bank of Hungary (MNB) will realise a profit on the sale of foreign currency from its international reserves to help to cover banks' FX liquidity needs related to compensation they must pay under borrowers' relief legislation and the planned conversion of FX mortgages, MNB director Balázs Vonnák said at a press conference on Wednesday, responding to a query by Hungarian news agency MTI. 

The MNB has sold almost €1 bln to banks to cover refunds they must pay retail clients under the legislation which voids the use of exchange rate margins and unilateral changes to contracts in October and November. It sold another €7.89 bln to banks for the planned conversion of FX retail mortgages into forints on Monday and Tuesday.

The 1 bln was sold at a rate of about HUF 308 to the euro and the 7.9 bln at around HUF 309. The average cost rate of the central bank's reserves was about HUF 288 to the euro on June 30, the Bank's semi-annual report shows. This implies an exchange rate gain of about HUF 20 per euro or total realised profit of nearly HUF 180 bln, unless the average cost rate has weakened substantially since June.

The international reserves are booked at their cost rate, and the difference between the official rate and the cost rate is accounted in the revaluation reserves on the balance sheet. When the forint weakens, the MNB realises an exchange rate gain when it sells foreign exchange. Last year, such gains were the MNB's most significant profit item, reaching slightly more than HUF 200 bln.

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