Austrian central bank governor warns about high forex lending in Hungary.

By bne IntelliNews September 21, 2010
The share of foreign currency-denominated lending in the loan portfolio of the Hungarian banks was excessively high and posed a risk to the stability of the segment, Austrian central bank governor Ewald Nowotny said. He pointed out that housing loans in the country were denominated primarily in CHF and thus, the CHF recent appreciation and the weakness of the forint will exert pressure on the borrowers. At the same time, however, Nowotny admitted that the unfavourable exchange rate dynamics had not led to an increase of the share of bad loans but argued that this was explained with lower spending by households with the consequent negative impact on private consumption and economic growth. Forex-denominated loans form around 65% of the total loan portfolio of the banking sector in Hungary. This share could decline in the future, taking into account the ban on foreign currency-denominated mortgage loans, in force since July.

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