Hungary's apex bank takes Dh11b swap bids
Currency feeling exchange rate pressure
Budapest: Hungary's central bank accepted €2.34 billion (Dh11.33 billion) in foreign-currency swap bids from local lenders to ease pressure on the forint from the early repayment of mortgage loans at below market exchange rates.
The Magyar Nemzeti Bank paid out €1.57 billion to lenders from October to January, the central bank said in a summary of the transactions posted on its website yesterday.
The government forced commercial banks to swallow exchange-rate losses on foreign currency denominated mortgages by giving the option for borrowers to repay their loans in a lump sum at below-market rates. Two-thirds of housing loans were denominated in foreign currencies, mostly in Swiss francs, and instalments on them soared as the forint weakened.
The central bank allowed domestic lenders to tap its foreign currency reserves to cope with an expected increase in demand for Swiss francs and euro.
The offer was aimed at easing depreciation pressures on the forint, which fell to a record-low against the euro last month and was the worst-performing currency in the world in the second half of last year. The forint strengthened 1.4 per cent against the euro to 290.4 per euro at 1:39pm in Budapest yesterday, rising the most in two weeks.
Hungarian banks lost 210 billion forint ($958 million) on the early repayment plan, the financial regulator PSZAF said in a report published on February 8. Lenders were able to deduct part of an extraordinary bank tax from their losses.
Loans
About 160,000 borrowers are estimated to have taken advantage of the plan until a December 31 deadline, repaying 19 per cent of the total outstanding foreign currency debt at financial institutions, PSZAF said. Ninety-six per cent of the repaid mortgage loans were denominated in Swiss francs. OTP Bank Nyrt., Hungary's largest lender, competes mostly with units of international banks, including Erste Group Bank AG, Raiffeisen Bank International AG, UniCredit SpA, Bayerische Landesbank AG, KBC Groep NV, and Intesa Sanpaolo SpA.
