According to Hungarian daily Napi Gazdasag, banks, leasing companies and the central bank have failed to agree on details concerning code of ethics, as it was called to be overly strict. Banks had stated that it would greatly reduce the amount of HUF-denominated lending and totally freeze FX-denominated lending. The representatives objected particularly to the central bank’s proposal that the total amount of monthly installments that an individual client pays on all loans not exceed 30% of monthly net income (HUF-denominated loans) and 15% of monthly net income (FX-denominated loans). The representatives had also stated that the NBH proposed restrictions on the conditions attached to EUR-denominated loans were too severe. The bank representatives proposed to gauge the maximum value of debt servicing to monthly income. Representatives from banks and leasing companies were more open to the central bank’s proposal that collateral on mortgages not exceed 70% of the value of the mortgage (HUF -denominated loans) and 50% of the value of the mortgage (FX -denominated loans). Bank and leasing-company representatives had agreed to submit proposed lending code. meeting is planned to take place at the end of next week.
Our view:
It is clear that central banks in countries where retail FX lending was common (i.e. Poland, Hungary, Romania), will plan to regulate it and make it stricter, in order to limit currency risk. We do not expect the news to have any significant trading impact.