FX Loan Legislation Incentivizing Banks To Release Debts

The Hungarian Parliament on Tuesday approved legislation that lifts most restrictions for participation in an exchange rate cap scheme for borrowers with foreign currency-denominated loans.

A last-minute amendment to legislation aims to bail out individual debtors with FX loans by incentivizing banks to partly release their debts. The legislation adopted by the Hungarian Parliament on 5 November 2013 eases the restrictions for participating in the so-called exchange rate cap scheme. Under the scheme, the exchange rate is fixed at a predetermined rate in order to avoid the adverse effects of exchange rate volatility on the debtors. The amount resulting from the disparity between the fixed rate and the market exchange rate is registered on a separate credit account and its repayment is deferred. The Hungarian State guarantees such deferred payment.