MNB stands ready to convert remaining household foreign currency loans into forints

Following the decision by the Magyar Nemzeti Bank’s Monetary Council, the MNB stands ready to provide to banks and other financial service providers affected an amount of EUR 1.1 billion needed to convert remaining household car, personal and other foreign currency loans into forints.

From a financial stability perspective, it is desirable to convert all remaining household foreign currency loans into forints. On the one hand, foreign currency-denominated car and personal loans themselves expose some 250,000 households to exchange rate risk. On the other hand, there is a significant degree of contagion risk, as those debtors also have mortgage loans converted into forints, in addition to their foreign currency debt.

Following the decision by the Monetary Council, the MNB will stand ready to participate in the conversion of remaining household foreign currency and foreign-currency-denominated loans into forints by making available the necessary amount of foreign currency. As with the conversion of household foreign currency mortgage loans, the programme adopted by the Council is expected to ensure that the conversion process will take place in a smooth fashion, without exercising a significant influence on the forint exchange rate and the stability of the financial system.

The Council has set a maximum amount of EUR 1.1 billion for the conversion into forints of the loans affected. The reason for this is that, based on data for the first half of 2015, household foreign currency loans of this amount remained with banks and other financial service providers following the conversion of foreign currency mortgage loans into forints. The MNB will make available the related euro sale facility not only to its counterparties, but also indirectly through its counterparties to the whole range of financial service providers having extended such loans. The Banks will stand ready to provide the foreign currency necessary for forint conversion unconditionally and immediately to banks and other financial service providers, but it will allow credit institutions to hold the foreign currency purchased at the MNB for a period of maximum one year. Due to the current abundance of foreign exchange reserves, reserve adequacy will be ensured over the long term even with the Bank’s euro sale programme.

Vissza a tetejére

The primary objective of the MNB shall be to achieve and maintain price stability. (...) Without prejudice to its primary objective, the MNB shall support the maintenance of the stability of the system of financial intermediation, the enhancement of its resilience, its sustainable contribution to economic growth; furthermore, the MNB shall support the government’s economic policy and its policy related to environmental sustainability, using instruments at its disposal.