Govt Submits Bill On FX Loans

(MTI) – The government submitted to parliament on Friday the first bill aimed at helping FX loans holders by settling certain issues in contracts signed with the banks in line with the supreme court Kuria’s recent legal uniformity decision.

Related article: Top Court Rules On Fairness Of FX Loan Contracts: Forint, OTP Shares Rise

According to the justification to the bill, the proposal seeks to eliminate unfair provisions, but in a way that the retained contracts can still be fulfilled.

If the bill is passed into law, it will void rate margins, the application of different rates for buying and selling foreign currency, and will ensure that the forint value of FX loans as well as instalments are calculated at the central bank’s official rate. The same rule will apply to all fees and extra costs connected to the loan.

The new legislation will stipulate that banks are primarily responsible for the removal of unfair terms from existing agreements.

After the law comes into effect, on the eighth day of its promulgation, financial institutions will have ninety days to convert the loans and the repayments retroactively. On the basis of this conversion, they will have to settle accounts with loan holders in line with a separate law to be passed during parliament’s autumn session.

Justice Minister Laszlo Trocsanyi said that the bill was the first step in a process which, including a second law in the autumn, will “correctly settle the forex loan issue in a way acceptable to all parties” by the end of the year.

Trocsanyi said the first pillar of the government proposal was aimed at eliminating rate differences and application of the central bank’s middle rate, while the second pillar sought to introduce strict criteria for banks’ unilaterally changing contract provisions. Under the bill now before parliament, banks will be obliged to prove that such changes made earlier meet those criteria.

As to the third pillar of the proposal, the minister said that under the new rules any legal proceedings or foreclosure procedures would be suspended.

“Collateral must not be auctioned off while a settlement dispute is still under way,” Trocsanyi said.

The leftist E-PM alliance said the bill would not settle the problems of FX loan holders.

In a statement sent to MTI, E-PM said the government failed to manage the social crisis caused by the collapse of the retail FX loan market.

Analysts polled by MTI agreed that the bill would impose bigger than expected burdens on banks.

Senior analyst Akos Kuti of Equilor said the invalidation of FX spread would imply a cost of 50-70 billion forints (EUR 162m-223m) and the invalidation of unilateral amendments 100-400 billion forints for banks.

Source: http://mtva.hu/hu/hungary-matters