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

Budapest, June 16 (MTI) – The risk that borrowers in foreign currency assumed can only be seen as unfair if they were not put in a position to credibly assess the extent of fluctuations in the exchange rate, the Kuria, Hungary’s supreme court, ruled today.

The court found, however, that the exchange rate spread applied by banks — the difference between the rate when the loan was disbursed and repaid — was unfair.

The uniformity ruling does not apply retroactively but is guidance to courts in future cases.

The use of exchange rate spread in foreign exchange denominated loans is unfair because consumers do not directly receive any services for it and the application of the spread is not transparent or comprehensible to consumers, the spokesperson of the Kuria civic section Katalin Gombos said.

Kuria official Gyorgy Wellmann said the most important aspect of the Kuria’s legal uniformity decisions applied to banks that change contracts unilaterally. This is acceptable only under such strict conditions that very few of the contracts will satisfy under the court’s ruling. The conditions include clear phrasing, the opportunity to cancel the contract and the rights of both contracting parties to make changes.

The Kuria ruled that the contract should be deemed unfair if it does not meet these conditions.

Wellmann warned debtors not to launch further lawsuits against banks, rather, they should wait for the relevant piece of legislation, stemming from the decision, to take effect. “Now the legislative power has the task to resolve the situation”, he added.

Shares of Hungary’s biggest lender, OTP Bank, strengthened on Monday after the Kuria announced its ruling. Shortly before 1pm the shares were trading at 4,440 forints and ten minutes later they stood at 4,540 forints.

The forint firmed, jumping from 307.75 in morning trade to 306.92 just after the announcement.

Analysts said that they could not for the moment estimate the volume of the possible financial burden for the banks that the ruling would entail. Buda-Cash analyst Zoltan Reczey said that the biggest question — the unilateral amendment of contracts — had been left open by the court.