docFinancial reforms to contain risks from FX lending in Hungary
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Financial reforms to contain risks from FX lending in Hungary
Financial reforms to contain risks from FX lending in Hungary Dániel Palotai chief economist Zürich, 21 November 2014 The roots of a major macroeconomic imbalance • Before the crisis: rapid growth in FX loans • A major channel of the international crisis hitting Hungary Magyar Nemzeti Bank 2 In parallel with depreciation NPL rates increased • Large volume of FX-loans and exchange rate depreciation makes it harder for households to repay Magyar Nemzeti Bank 3 Actions taken by authorities Magyar Nemzeti Bank 4 Actions taken by authorities Magyar Nemzeti Bank 5 Actions taken by authorities Magyar Nemzeti Bank 6 Actions taken by authorities Magyar Nemzeti Bank 7 Actions taken by authorities Magyar Nemzeti Bank 8 Early repayment scheme FX-debtors were offered to repay their loans at a preferential exchange rate Magyar Nemzeti Bank 9 Actions taken by authorities Magyar Nemzeti Bank 10 Exchange rate cap The participating borrowers can repay their loans at a preferential exchange rate for five years – the difference is accounted for on a loan account Magyar Nemzeti Bank 11 Actions taken by authorities Magyar Nemzeti Bank 12 Actions taken by authorities Magyar Nemzeti Bank 13 Actions taken by authorities Magyar Nemzeti Bank 14 Supreme Court decision and conversion • According to Curia’s decision and following legislation damages will be refunded to borrowers from: • exchange rate margins – bid-ask spreads • unilaterally raised interest rates • Conversion of households’ FX-mortgage loans on 1 February Magyar Nemzeti Bank 15 Actions taken by authorities Magyar Nemzeti Bank 16 PTI and LTV regulation of the Central Bank • PTI and LTV regulations introduced by the Central Bank – differentiates between FX and HUF loans • Shall prevent the build up of further risks Payment ot income ratio Loan to value ratio Under 400 000 HUF income At 400 000 HUF monthly income, or above Under 400 000 HUF income At 400 000 HUF monthly income, or above HUF 50 % 60 % 80 % 75 % EUR 25 % 30 % 50 % 45 % Other currency 10 % 15 % 35 % 30 % (400 000 HUF approx. 1300 EUR) Magyar Nemzeti Bank 17 Measures significantly reduced the risks of the household sector … Magyar Nemzeti Bank 18 … and also macroeconomic imbalances Magyar Nemzeti Bank 19 Thank you for your attention!
