Hungary to Avoid Blitzkrieg on Banks in Loan Plan, Orban Says

Hungary’s drive to phase out foreign-currency mortgages won’t be similar to the 2011 “Blitzkrieg” on banks when the government forced lenders to swallow losses on such loans, Prime Minister Viktor Orban said.

The cabinet wants to eliminate foreign-currency household mortgages for good as they are the economy’s biggest vulnerability, Orban said on public radio MR1 Kossuth today.

“We have to find a solution that doesn’t wreck the financial system and helps those in trouble,” Orban said. Economy Minister Mihaly Varga has a broad mandate to negotiate with lenders on a plan, “whether he deletes these loans or, converts them to forint, or chooses a different solution, that is up to the minister.”.

The Hungarian premier, who faces elections in 2014, is offering help to households indebted mostly in Swiss francs whose payments soared as the forint weakened during the global credit crisis. The solution will cover about 1.9 trillion forint ($8.4 billion) of such mortgages, while the 1.8 trillion forint of home-equity loans won’t be included, Economy Ministry State Secretary Gabor Orban said yesterday.

OTP Bank Nyrt., Hungary’s largest bank, rose 0.9 percent to 4,580 forint by 11:32 a.m., extending its biggest weekly gain in six months. It dropped 36 percent and the forint weakened 12 percent in 2011, when the government allowed clients to pay back their foreign-currency mortgages at below-market rates.

The forint strengthened 0.5 percent to 296.27 per euro, snapping a three-day decline.

Hungarian households still hold more than 510,000 foreign-currency mortgage contracts, including 284,000 home-equity loans, according to central bank data.

“Hungary is strong now, so we aren’t seeking a solution similar to the early repayment, we want calm, sober negotiations and to help not just a fraction of foreign-currency borrowers but get rid of the institution of such loans altogether,” Prime Minister Orban said.

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