Lenders warn of risk associated with farm sector repayment moratorium

A deterioration in borrowers’ credit risk classification resulting from a government-mandated repayment moratorium for drought-hit farmers could harm clients’ creditworthiness in future, presenting significant risk, the Hungarian Banking Association said in a statement issued on Tuesday.

The association noted that farmers will need further, significant bank credit to maintain the pace of development amid extreme weather conditions. The banking sector is prepared to offer “solutions that conform to the market”, it said.

The association urged agriculture sector borrowers impacted by the drought to find “appropriate financial solutions” together with their banks.

Márton Nagy, the minister of economic development, however, slammed the association for its “misleading communication”, saying the moratorium had been introduced to assist farmers with “the sudden burden” of extreme weather conditions they had to face. He added that farmers had been given the choice of using that opportunity or not, and insisted that the Banking Association was expected to help ailing borrowers manage their difficulties rather than “present misleading communication suggesting negative ramifications”.

Banks could elaborate their special risk management procedures to save clients from suddenly increasing instalments, the minister said. “If banks had taken care of the banking side of the problems arising in agriculture in time, the institution of a repayment moratorium would not have become necessary,” he added.

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Source: MTI