The Magyar Nemzeti Bank (MNB) has played a major role in the conversion into forint of household foreign currency mortgage loans. As a result of the conversion, the vast majority of household foreign currency loans have been successfully phased out. The elevated volatility of the Swiss franc exchange rate has shown that the remaining exposure in foreign currency loans amounting to HUF 300 billion and representing 250,000 contracts – mostly Swiss franc-denominated vehicle and personal loans – entails considerable risks given its impact on a wide portion of society. In the recent past, the MNB has repeatedly called attention to this issue in its Financial Stability Report and at other forums. In preparation for the conversion into forint of the remaining household foreign currency loans, at its meeting on 9 June 2015 the Monetary Council decided that all of the foreign currency liquidity for the conversion would be provided to banks from foreign exchange reserves, facilitated by the favourable reserve adequacy figures.
On 19 August 2015, the MNB and the Hungarian Banking Association concluded an agreement which regulates the terms and conditions of the transactions related to forint conversion. As part of this agreement, the MNB will provide all financial institutions access to its Swiss franc sale tenders. The MNB’s counterparty credit institutions will access the Bank’s facility directly, while other financial institutions will have access to it indirectly, through umbrella banks.
The first Swiss franc sale tender will be held on 24 August 2015 at 10 am. Credit institutions will be able to make foreign currency conversions with the MNB of up to CHF 0.9 billion in spot transactions unconditionally, in full accordance with their agreed needs, at the latest official MNB exchange rate effective at the time of the tender.
In the agreement, the Banking Association guarantees that its members will meet their hedging (foreign currency purchase) needs resulting from conversion into forint of the remaining foreign currency loans at the MNB’s tenders. The MNB and the Banking Association are both committed to ensuring a rapid and orderly conversion of the remaining foreign currency loans, preserving the stability of the financial system and avoiding any major impact on the exchange rate of the forint.
The programme does not jeopardise the Bank’s reserve adequacy; the level of reserves is adequate and the outstanding amount of foreign currency loans in question cannot be considered substantial, as it only amounts to one-tenth of the outstanding amount of foreign currency mortgage loans phased out during the forint conversion and settlement.
The MNB is prepared to phase out the remaining household foreign currency loans in a rapid and orderly manner. The era of household foreign currency loans started at the beginning of the 2000s precisely with vehicle purchase financing, and the conversion of these loans into forint may mark the end of the phasing out of household foreign currency loans.