Hungary enacts first chapter of government's FX debt bailout plan (2)

The bill was passed with 184 MPs in favour of the proposal, 1 against and 2 abstaining from the vote. The new Act of Parliament is taking effect 8 days after it is gazetted.

The gist of the bill:

• The new legislation eliminates the concept of currency spread; instead, banks should have used the middle currency rate in extending foreign currency loans and calculating payments.
• The contract clauses stipulating banks' right to make one-sided changes to the terms and conditions without the client's consent are null and void, except if banks are able to demonstrate the fairness of procedures in a court of law over the next few months (chances for which are low).
• The above apply to all retail foreign currency and forint loans, as well as to capital lease contracts, except debtors participating in a preferential early repayment and those that have received assistance from the National Asset Management Agency.
• As for currently effective contracts signed since 1st May 2004, as well as for those closed in the past 5 years, banks are required to refund all illegitimate charges. Until then, banks are banned from hiking interest rates; foreclosures and lawsuits against clients are suspended.
• Legislation concerning the specifics of settlement of charges, as well as those regarding the conversion of foreign currency loans, are expected to be brought in September.

Analyst and central bank estimates of the aggregate amount due to be refunded to foreign currency borrowers vary a great deal due to legal and statistical uncertainties, patchy data etc. Estimates typically fall somewhere between HUF 400 billion and HUF 900 billion.

• Tags:
• banking sector,
• economy,
• property,
• debt,
• bailout,
• foreign currency