Economy
Hungary OTP will weather FX debt repayments, but rates could go rampant - Csányi
Competition is, of course, favourable for the Hungarian banking sector, Csányi said, but he also warned that “if the government’s intention is fulfilled and it beats the banks, it will actually defeat itself. Interest rates will break loose," Privatbankar.hu reported.
Speaking at Budapest’s Corvinus University Csányi said late on Monday that the Hungarian economy is too small for 38 banks. As an example he mentioned the Netherlands “where three large banks control 90% of the market".
Csányi added that it was exactly cut-throat competition that made foreign currency lending so widespread in Hungary, as the situation on the market forced many banks to behave irrationally.
In this regard, the crisis in 2008 came just in time. If FX lending practices had remained unchanged, it would have put the Hungarian banking system into jeopardy, he added.
Csányi reminded that OTP was lobbying against foreign currency lending. He said ten years ago MKB was the one that pioneered in this sector with its euro-denominated loans, and was followed by CIB and K&H in 2004 with CHF-based loans. He pointed out that even then OTP did not jump on the bandwagon.
He said a substantial part of the FX borrowers, about half of them, were speculators with mortgage equity withdrawals (MEW is defined as the case when a loan to a household collateralised by real estate is used for a purpose different than house purchase.) who deposited what they borrowed because deposit rates were higher than the rate on the loans.
With this view Csányi underpinned his view that it was a mistake to treat equally in the repayment programme those who had taken out FX-based mortgages for and those who collateralized their real estate only to use the loan to make money.
The most annoying in this is that some of the borrowers were convinced by brokers to take out the FX loans. He said it should be seriously contemplated whether loan brokers should be allowed to operate in the country in the future or not.
OTP has HUF 1,200 bn worth of mortgage loans, HUF 548 bn of which is FX-denominated, Csányi said. Even at a full conversion of these FX debts OTP’s capital adequacy ratio will remain stable and in line with the Tier1 standard. It will still be 13%, way above the minimum requirement. If only very few debtors choose this option, there will be no bigger shock, he added.
Speaking at Budapest’s Corvinus University Csányi said late on Monday that the Hungarian economy is too small for 38 banks. As an example he mentioned the Netherlands “where three large banks control 90% of the market".
Csányi added that it was exactly cut-throat competition that made foreign currency lending so widespread in Hungary, as the situation on the market forced many banks to behave irrationally.
In this regard, the crisis in 2008 came just in time. If FX lending practices had remained unchanged, it would have put the Hungarian banking system into jeopardy, he added.
Csányi reminded that OTP was lobbying against foreign currency lending. He said ten years ago MKB was the one that pioneered in this sector with its euro-denominated loans, and was followed by CIB and K&H in 2004 with CHF-based loans. He pointed out that even then OTP did not jump on the bandwagon.
He said a substantial part of the FX borrowers, about half of them, were speculators with mortgage equity withdrawals (MEW is defined as the case when a loan to a household collateralised by real estate is used for a purpose different than house purchase.) who deposited what they borrowed because deposit rates were higher than the rate on the loans.
With this view Csányi underpinned his view that it was a mistake to treat equally in the repayment programme those who had taken out FX-based mortgages for and those who collateralized their real estate only to use the loan to make money.
The most annoying in this is that some of the borrowers were convinced by brokers to take out the FX loans. He said it should be seriously contemplated whether loan brokers should be allowed to operate in the country in the future or not.
OTP has HUF 1,200 bn worth of mortgage loans, HUF 548 bn of which is FX-denominated, Csányi said. Even at a full conversion of these FX debts OTP’s capital adequacy ratio will remain stable and in line with the Tier1 standard. It will still be 13%, way above the minimum requirement. If only very few debtors choose this option, there will be no bigger shock, he added.
