Banks expect market-rate conversions of FX loans, says bank assn head

Budapest (MTI) – Banks expect that foreign-currency loans would be converted to forints at market rates, the head of the banking association said on Tuesday.

Banks will respect the laws and settle accounts with clients, repaying the difference after unilateral interest-rate rises without fail, Levente Kovacs told MTI. As a result clients will end up just as if they had taken out forint-denominated loans at the time, or better, he said.

Costs of settling accounts with clients, estimated at 1,000 billion forints (EUR 3.23bn), will rise by several hundred million due to human resource and IT needs, Kovacs said. He noted that the process is so complex that it will take banks about 9 months and the use of all their resources to complete. Banks can only start looking into the future and building portfolios after this, he said.

Kovacs said he did not expect any banks to shut down completely and leave the country, mainly because banks usually plan long term, but he called the past few years unprecedented in the amount of loss generated in the banking sector and projected that while some banks will be able to grow at an above-average pace, others will continue to make losses.