Hungary plans to scrap state support for home savings bank deposits (updated)
16/10/2018 08:58
* Fast-track motion takes market participants off guard
* Would scrap state subsidies for such savings in future
* Aims to channel state funds to other housing programmes
* Lawmaker says companies earned "extra profits" on the
scheme
(Adds details, quotes, background)
BUDAPEST, Oct 16 (Reuters) - Hungary's government plans to
end state subsidies for home savings bank deposits, saying that
the scheme was costly, inefficient and had failed to encourage
the construction of new houses.
The measure, to be debated by lawmakers on Tuesday, could
dent profits of banks operating in Hungary, including domestic
lender OTP Bank OTPB.BU , Austria's Erste Group Bank ERST.VI
and Fundamenta, majority-owned by Germany's Bausparkasse
Schwäbisch Hall.
Each institution declined immediate comment on the measure.
After taking power in 2010, Orban slapped banks with hefty
taxes and measures to help borrowers at the expense of lenders
to shore up state finances. In a landmark 2015 agreement, he
agreed to cut the bank tax and refrain from further unilateral
measures that hurt banks.
The fast-track measure comes amid a general improvement in
Hungary's economy and a boom in lending, which has bolstered
banking profits. The bill, which if passed will end subsidies
immediately, caught the market by surprise.
"The state has supported home savings schemes for more than
twenty years, but this form of savings does not effectively
support home creation objectives, while service providers are
realising extra profits on part of the state subsidies," ruling
Fidesz party lawmaker Erik Banki said in the bill.
"The home savings scheme has become an expensive but
inefficient instrument for both the state and taxpayers," Banki
said, adding that the government should channel those funds to
other programmes to support housing.
Banki said the main lenders have made profits of almost 60
billion forints ($215.52 million) on the scheme since Orban's
government took power in 2010. He said the scheme would cost the
country more than 70 billion forints this year.
Hungarian real estate broker Duna House Holding DUNA.BU
said that scrapping the subsidy may cut the volumes of the
scheme to zero and could hurt its results in the short term.
It added that the proposed changes may trigger consolidation
in the loan brokerage sector over the medium term, which could
increase the company's market share in mortgage loans.
($1 = 278.4 forints)
(Reporting by Gergely Szakacs
Editing by Andrew Heavens and Louise Heavens)
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