New plans of the Hungarian government upset markets even though their details were not announced yet. Yesterday the justice ministry said that borrowers should not suffer for their inability to service debt due to “external” reasons like exchange rate movements. In 2011, the government tried to help households with conversion of their FX loans, but fixing of the exchange rate CHF/EUR at 180 was not attractive enough and only around 15% of the total amount of FX loans was converted. Total FX loans amounted to 4769bn HUF at the beginning of 2012, which corresponded to 14% of GDP. The overall negative impact on the banking sector was weak. However this time, with parliamentary elections to be held next year, things may look different. The government is scheduled to discuss the topic on its meeting on July 24 and to calculate potential cost of the planned measure now would be premature. Estimates range from a negligible impact to several percent of GDP. The intended fixing of the exchange rate is rumoured to be around 155 CHF/HUF. Given that CHF/HUF exchange rate oscillates around 240, close to values seen in the second half of 2011 when households had the first opportunity to convert their loans at fixed rate), the current offer promises to be much more favourable for borrowers. No wonder that banks in Hungary carefully monitor any signal the government may send regarding this issue.