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Hungary’s Escape From Forex Loan Disaster Becomes An Example To Follow In Central Europe

By Tamás Székely // 2015.01.20.

The governments of several central European countries have asked for information from Hungary’s Economy Ministry concerning how Hungary is phasing out foreign currency retail loans, the ministry said. Representatives of the finance ministries of Croatia and Poland have contacted the ministry to request the information. The European Central Bank is also observing the process, the ministry said.

In the interest of successfully managing the problem of FX loans, the economy ministry is gladly sharing Hungary’s experience and solutions till now with ministers in interested countries, it said. Hungary is in the process of phasing out the FX lending stock. Legislation approved in November effectively set the rate for the conversion of the loans into forints at 256.5 forints to the Swiss franc and 309.5 to the euro. Thus most Hungarian borrowers were spared the effect of the Swiss franc’s sharp strengthening after the Swiss National Bank removed the currency’s cap against the euro.

The Swiss central bank’s removal of a minimum franc-euro rate has confirmed that the Hungarian government made the right decision of eliminating forex loans from the country’s banking system in 2015, Mihály Varga, the economy minister, told last week. Through fixing the exchange rate of franc based loans at the government has saved debtors from having to repay an increase of their debt amounting to 500 billion forints, the minister said. Hungarian PM Viktor Orbán, often criticized for punishing banks, is now being hailed as a hero for warding off financial disaster with his quest to rid the country of mortgages worth billions of Swiss francs, economic news portal said last Friday.

via photo: public domain