The law will be one in a series of legislation aimed at finding a solution to the problems of troubled forex borrowers, whose repayments soared when the forint fell against such currencies as the Swiss franc and euro.
Government spokeswoman Éva Kurucz said the government has discussed preparations for the law and asked a group of experts to continue working intensively on the legislation. The date of submission to Parliament should be decided at the next meeting, she said.
After the Forex Act was passed in July, based on a Kúria, supreme court, ruling on unfair banking practices, banks are expected to calculate this month and in October the exact amount of compensation to borrowers, as well as setting the instalments in forints that borrowers will have to pay for the remaining portion of their loan.
Foreign-currency-denominated loans will be eliminated from Hungary’s lending market by way of converting them to forint ones before the end of this year, National Economy Minister Mihály Varga has declared.
Based on an average-sized loan, it is estimated that borrowers would be able to get back between HUF 600,000 and HUF 1 million towards December.
Holding banks ‘to account’
With the approval on 4 July of the law package on relief for foreign-currency loan-holders, the process of “holding banks to account” has begun, the ruling Fidesz party says. Banks are attacking Parliament’s decision in the courts but when all lawsuits have been concluded, every single contract and every forint will have to be accounted for, the party said. The process starts with forex loans and will continue with forint ones, it added. “A new phase has begun in holding banks to account; a period in which an honourable and fair banking system will operate in Hungary,” a statement said.
Loan contracts were legal: Csányi
Retail bank OTP’s loan agreements were always in line with laws effective at the time of their execution, OTP chief Sándor Csányi has told commercial InfoRadio. He added, however, that the contracts are “obviously not in line” with the recent Kűria decision, under which unilateral changes to forex loan contracts are seen as unfair.
Concerning the lawsuits banks have filed against the Hungarian state to prove the fairness of changes they had applied, including higher interest rates or fees, Csányi said that all those contracts were different, and the court decisions could also turn out to be different. He said the 30-day deadline for courts to conclude these cases was too short.
Under the legislation, Hungarian lenders must compensate clients for unilateral changes to contracts unless they can successfully defend the practice in court. Hungary’s banks have filed a total 79 cases against the state to defend their position.
New rules to keep loans in limits
In a move to prevent any new build-up of household debt, the National Bank of Hungary from January will introduce two indicators underpinning new loan rules. The central bank said the ratio of repayments-to-income index would assess a client’s legal income and put a limit on repayments undertaken, while the loan-to-value ratio index assesses the proportion of collateral, such as the value of a home in the case of a mortgage, and limits the amount that can be borrowed. In the case of the former, every new loan over HUF 200,000 must be examined. Further, no loan instalments will be allowed to exceed 50% of monthly income, or in the case of income over HUF 400,000, 60%.