Orbán: There will be loan conversion and maximized utility charges
Thursday, 15 September 2011 08:21
Prime Minister Viktor Orbán announced a six-point national protection program in parliament. The government allows those borrowers who have their debts denominated in a foreign currency to pay off their debts at a fixed rate; utility charges such as water and waste water will be at centrally set prices, and also the 35% VAT rate is going to be introduced which apply on luxury goods. The government seeks the approval of the EU to be able to take these measures. In the national protection program the government declares that borrowers who have their debts denominated in a foreign currency can pay off their debts at a fixed rate Hungarian forint in one lump sum in as it was suggested by the Fidesz fraction, said Orbán. Banks are not allowed to charge any fees when the debt is paid off in full. According to Orbán, with this step the government wishes to provide an opportunity to those who can pay off their debt in one lump sum.
According to the prime minister, this really is a risk and loss sharing agreement. According to Orbán the bulk of foreign currency denominated debt was taken in Swiss Francs (CHF) at an exchange rate between 155-160 Hungarian forints (HUF), hence the loss is covered by the borrower up to the 180 HUF/CHF exchange rate (the rate at which the government would allow borrowers to pay off their debt), and the lending bank will have to take the loss beyond that. According to the prime minister, the decision does not threaten the stability of the banking system since „there are mother companies (banks) behind the foreign banks in Hungary and the state is behind OTP and FHB [two of the biggest Hungarian banks active in mortgage lending]. According to Orbán there is no real threat that foreign banks will leave the country since they are already withdrawing large chunks of their deposits from Hungary, and are also continuously decreasing their lending activities here. According to the prime minister, the fixed rate debt payoff structure may well be attacked at various international forums, and if the country was to be dismissed then „we will react with the relevant countermeasures”, said Orbán. He also asked the parties of the governing coalition not to make the conversion of the existing foreign currency denominated loans into Hungarian Forints and the provision of loans in Hungarian forint mandatory.