Hungary’s new bill to assist foreign-currency borrowers is negative in terms of banks’ credit ratings, Moody’s said this week. Banks are expected to have to pay up to EUR 2.6 billion in compensation to borrowers after the passing of the law, the ratings agency said. Moody’s estimated that this figure is double earlier expectations. Bills to convert forex loans into forint-denominated ones and on calculating the exact way banks should settle with clients are scheduled to go through Parliament by year’s end. MPs have passed a law that declares, based on a June supreme court ruling, different exchange rates applied in the disbursement and repayment of forex loans as well as unilateral changes to retail loans are void. Raiffeisen Bank International (RBI) has said borrowers’ relief legislation recently approved in Hungary could cost its local business EUR 120-160 million. The impost resulting from the legislation, which voids the use of exchange rate margins and unilateral changes to contracts for retail loans, is expected to be spread across Q2 and Q3 2014, RBI said. The amount does not include costs relating to potential future conversion of foreign-currency loans into local currency, it added. National Bank of Hungary deputy governor Ádám Balog said the borrowers’ relief legislation could cost the financial system HUF 700-900 billion, thus raising the lower number from HUF 600 billion. Bank Austria, a unit of UniCredit, said the measures would not push it into the red. “We will have a positive annual result in Hungary no matter what lies ahead,” Reuters quoted CEO Willibald Cernko as saying. “We will certainly not have to inject more capital.”
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