From February 1, there will be no foreign currency-based home loans, and the resulting problems will disappear from the domestic financial system, Michael Vargas said at a press conference in Good Finance on Saturday.
Increase of HUF 1,000 billion in debt
The Minister emphasized that February 1 is a historic date, settlement and conversion will begin, and the Fair Banking Act will also enter into force. The government protected the population, local governments and public finances from an increase of HUF 1,000 billion in debt by adding HUF.
He stated that the government and the Hungarian Banking Association agreed that banks would voluntarily maintain a housing sales quota system until the end of the conversion of foreign currency loans into forint and until settlement.
Michael Vargas emphasized that the moratorium on evictions would be maintained, thus helping families in difficult situations.
Michael Vargas called the withdrawal of foreign currency loans the most important step of economic policy in 2015.
Withdrawal of foreign currency-based consumer mortgages
He stressed that the withdrawal of foreign currency-based consumer mortgages will translate into HUF 3,600 billion of loans, with the move to protect the homes of about half a million families from extreme and unpredictable exchange rate fluctuations. As a result of the settlement of the banks, the loan repayment details will be reduced by 25-30 percent.
Michael Vargas said that a real financial catastrophe would have been averted if the government had not acted on time, with people facing debt of about HUF 700 billion. Forint conversion prevented the repayment of foreign currency debtors by 20-25 percent due to the decision of the Swiss Good Finance in January.
Reducing the exposure to foreign currency debt
He added that by reducing the exposure to foreign currency debt, the burden on public finances was also reduced, as the government protected the population, the general government and local governments from exchange rate losses of about HUF 1,000 billion, ie such an increase in debts. He also said that the banks themselves were doing well, because without the HUF conversion, the number of non-performing debtors would have risen again in the future, due to the significant exchange rate changes, and the banks would have had to set aside another significant provision.
The Minister of National Economy highlighted with satisfaction the Government’s ruling by the Constitutional Court on Thursday that the Bank Accountability Act was in line with the Basic Law. In practice, this means that banks that have so far litigated have to start settling with their clients.
He recalled that in the fall of last year the Parliament set the exchange rate of HUF 256.47 for the Swiss franc, 308.97 for the euro and 2,163 for the Japanese yen.
He said: Foreign currency-denominated, concerned customers will officially notify their bank of settlements and forint conversion in March and April. If the customer disputes the settlement, they can file a complaint with their bank within 30 days of delivery. If the client fails to agree with the bank, he can contact the Financial Arbitration Board under the auspices of the National Bank of Hungary, the minister added.
Michael Vargas pointed out that the government has set a precedent in Europe for its actions to protect Hungarian people and families, and the steps taken in Hungary today are already praised by the international press.
The minister said that prestigious economic magazines such as the Economist and the Financial Times praised the Hungarian government in its articles for taking timely action and protecting Hungarian citizens from the consequences of the Swiss Good Finance’s decision in January.
Movements of the financial markets
Michael Vargas recalled the sentences in a Polish newspaper saying that the Hungarian example shows that the state has the right to protect its citizens from the movements of the financial markets.
He pointed out that the withdrawal of foreign currency loans had required consistent steps taken by the government since 2010 to correct the erroneous decisions of previous socialist governments, to compensate, for example, for previous governments ‘inadequate regulation of banks’ lending practices.
The conversion of the forint had to take the steps of the National Bank of Hungary, the legal situation had to be resolved, and the decision of the Mansion was also required.
He recalled that interest rates were so high in 2010 that the conversion would not have been a real help to foreign currency borrowers. On the other hand, the MNB’s entire foreign exchange reserves would have been needed for the forint conversion in 2010, with unforeseeable consequences for the forint exchange rate.
Finally, Michael Vargas emphasized that since then, due to the results and indicators of the Hungarian economy, interest rates have dropped significantly, so that the conversion to the Forint can be successfully implemented.
Michael Vargas said on a question: recently, he wrote a letter to Sean Cole, President of the Parliament, urging the competent bodies of the parliament to create the conditions for the election of the members of the Good Finance’s Supervisory Board as soon as possible.