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National Bank to be involved in FX mortgage conversion?

August 1st, 2013

A conservative pundit warns against a selective conversion of loans denominated in foreign currencies. He proposes that the National Bank should step in and offer part of its foreign currency reserves to convert all FX household loans into Forint credits.

PM Orbán announced plans last week to convert foreign currency based mortgages into Forint loans (see BudaPost July 26). As Népszabadság reported, several banks announced that they cannot shoulder the costs involved on their own, and warned that the conversion could further reduce the credit available for Hungarian entrepreneurs. Finance Minister Varga has begun negotiations with pro-government NGOs and the Hungarian Banking Association about how the cost should be shared among the banks, the State and the debtors.

The government should not consider foreign currency based loans as a welfare issue, Attila Michnai writes in Heti Válasz. The conservative commentator would find it highly controversial if the government converted mortgages selectively in order to save the most troubled debtors from eviction. Such a step would send a message that debtors are better off not paying their loans, Michnai argues. Instead of a need-based conversion, the government should convert all FX based loans into Forint ones, including all kinds of commodity credits, rather than only mortgages, he suggests. Such a large scale project could only be undertaken by involving the National Bank, Michnai speculates. He calculates that 20 per cent of the foreign currency reserves of the National Bank would suffice to perform the conversion, and the losses caused by the reduced exchange rates used in the conversion could be divided equally among debtors, banks and the state.

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