The National Bank of Hungary (NBH) outlined measures it has taken to protect the interests of households on the lending, insurance and capital markets in an annual report released on Monday.
Among measures on the lending market the NBH noted in the Consumer Protection Report was the roll-out last year of Certified Consumer-Friendly Home Loans which aim to counter high interest margins and a low rate of borrower refinancing.
Certification of products requires banks to cap their home loan lending margins at 350bp, origination fees at 0.75 percent or 150,000 forints (EUR 480), and early repayment fees at 1 percent or, in the case of repayment from home savings bank accounts, 0 percent.
Lenders must also make potential borrowers an irrevocable loan offer when they inquire at a branch.
Such certified products make it easier for consumers to compare offers by different banks, boosting competition, the NBH said in the report. They also support penetration of loans with interest rates fixed for longer periods of time, it added.
The proportion of variable-rate loans within banks’ outlays “continues to be significant”, presenting a risk that is a “monitoring priority” both from the view of consumer protection and financial stability, the NBH said.
Some banks’ failure to properly inform borrowers presents another risk, as evidenced by client feedback and the NBH’s own review of such practices undertaken last year. The NBH found in the review a number of cases in which banks violated regulations on communicating as well as calculating APRs on loans.
A code of ethics introduced for sellers of life insurance last year, drawn up after long consultations with market players and in close cooperation with lawmakers, squeezed out overpriced products, the NBH said.
The NBH will use all of the tools at its disposal to maintain this level of consumer-friendliness on the market in the long term, the financial market watchdog added.
Preparing for compliance with the European Union’s new Directive on Markets in Financial Instruments (MiFID II) and the Regulation on Markets in Financial Instruments (MiFIR) was a “big task” for both the market regulator and market players, the NBH said. The new rules were applied from July 3, 2018.
Cryptocurrencies are yet another risk cited by the NBH in the report. The central bank said it had issued a number of warnings concerning products linked to cryptocurrencies and initial coin offerings, calling them “speculative investments” that are “extremely volatile”.