Conversion of Hungary FX loans just one option -minister (updated)

MBH Jelzalogbank Nyrt

02/08/2013 07:43

* Says compromise possible with banks, several options discussed * Says hopes forint weakening will be just temporary, could stabilise * Have not yet discussed burden-sharing with banks, budget stretched -minister (Adds detail, more comments) BUDAPEST, Aug 2 (Reuters) - Hungary has discussed several options with banks for phasing out existing foreign currency mortgages and converting them into forints is just one of the proposals, Economy Minister Mihaly Varga told the daily Magyar Hirlap on Friday. On Thursday, Varga said conversion into forints was a "likely" solution and a plan must be in place by the autumn, the latest in a series of signals from the government worrying banks, who stand to lose from conversions.  ID:nL6N0G21SN  Hungarian households took on billions of dollars of housing debt pegged to the Swiss franc or euro, mostly prior to the 2008 economic crisis, and are now suffering from an almost 40 percent swing in the exchange rate against the local currency. "Besides conversion into forints, we have also discussed the option of partial conversion of loans into forints or strengthening the (existing) exchange rate cap option," Varga was quoted as saying in an interview published online. This option allows borrowers to pay back forex loans at more favourable exchange rates, while the difference is accumulated on an overflow account that debtors will have to start repaying several years later. Varga reiterated there were not enough funds available in the state budget to help borrowers but added that a compromise was possible with the Hungarian Banking Association. He said the programme aimed primarily at homeowners. Prime Minister Viktor Orban's government, seeking re-election next year, has said it wants to ease borrowers' burden, spooking banks and financial markets at a time when global investors are considering a pull out of emerging markets. Varga said the talks have not yet touched upon how big a burden banks would be able to willing to take on. But the head of Austrian bank Raiffeisen  RBIV.VI  in Hungary has said lenders were now at now a critical stage and could not stomach further losses.  ID:nL6N0FW2NN  The minister expressed hope that the forint  EURHUF=D2 , which has lost some 3 percent of its value to the euro since the latest forex relief plans were flagged, would stabilise. "Hopefully the forint's weakening will be just temporary," Varga said, adding that Hungary paying back the last chunks of its 2008 rescue loan to the IMF, the phasing out of forex loans and stronger economic growth could shore up the forint. Varga reiterated that there would be no election-year fiscal loosening in 2014, when he said economic growth could exceed 1.5 percent after about 0.7 percent expected this year. (Reporting by Gergely Szakacs; editing by Patrick Graham) ((gergely.szakacs@thomsonreuters.com)(+36 1 327 4748)(Reuters Messaging: gergely.szakacs.thomsonreuters.com@reuters.net)) Keywords: HUNGARY FXLOANS/