Hungary Central Bank Offers 9 Billion Euros for Loan Conversion

Hungary’s central bank will offer 9 billion euros ($11 billion) to commercial lenders from its reserves to neutralize the market impact of the conversion of household foreign-currency loans to forint.

The National Bank of Hungary wants to ensure such loans are phased out “in a fast and orderly manner, while preserving the stability of the financial system and without substantial impact on the forint’s exchange rate,” the regulator said in a statement on its website today.

Prime Minister Viktor Orban’s government is working on eliminating the foreign-currency debt that has burdened banks and borrowers as the forint plunged after the collapse of Lehman Brothers Holdings Inc. Lenders also face refund obligations of as much as 1 trillion forint ($4.1 billion) for “unfair” charges, according to official estimates.

The forint has weakened 3.8 percent this year, the third-worst performance among 24 emerging-market currencies tracked by Bloomberg, after the Russian ruble and the Argentine peso. It gained less than 0.1 percent to 308.78 per euro by 2:52 p.m. in Budapest.

The plan will leave central bank reserves above levels demanded by international financial institutions and investors, according to the statement. The 9 billion euros offered will be in addition to 3 billion euros pledged in September to assist lenders with the refund of loan charges.

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