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Top court rules FX lending not against law – reactions
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Budapest, December 16 (MTI) – Hungary’s Supreme Court, the Kuria, on Monday said that lending in foreign currency and related contracts are legal, and the client should bear the risks related to exchange rate fluctuations.
Banking Association secretary general Levente Kovacs said the ruling proved banks had been in the right all along.
Clients took out loans with better conditions than those applicable to forint loans at the time, so they should bear the risks involved, the head of the Kuria’s civil department, Gyorgy Wellmann, said after the court’s ruling, whose purpose is to provide guidance to the lower courts.
He added that the damaging consequences of economic and social problems linked to lawsuits filed by FX borrowers against the banks cannot be addressed purely by legal means, and the courts cannot be expected to solve the problem.
“Foreign currency loan contracts do not violate laws or moral rules purely because of their inherent exchange-rate risk. Neither do the cases count as usury or sham contracts,” the ruling said.
The court noted that banks have an obligation to inform their clients about the risks of exchange rate fluctuations and their effect on the monthly repayments. It added that if a court finds a part of a contract invalid, it should aim not to invalidate the whole contract but only the part in question.
The prime minister had earlier urged the Kuria to rule on the issue of troubled forex debtors to ensure legal consistency. Orban said that rulings in such cases had been controversial and insisted that “people cannot be put in a situation in which the government introduces a legal solution, then the courts pass opposing decisions which create legal chaos”.
The forint firmed from around 301 past 299 to the euro immediately after the much anticipated decision was announced. The share price of OTP Bank, Hungary’s biggest commercial lender, was up almost 4 percent after the announcement.
Hungary’s highest court has taken the side of banks, Antal Rogan, head of the parliamentary group of the ruling Fidesz party, told a press conference in light of the Kuria decision. Rogan said the Kuria is expected to make other decisions on related issues, such as unilateral interest-rate changes to interest rates and exchange rate margins.