29th May 2015
Budapest, 2015. May 29 - The debt settlement affecting 2.1 million contracts and the conversion of around 500,000 foreign currencydenominated mortgage loan contracts led to a sharp reduction in the vulnerability of the banking sector, and consequently the Hungarian economy. As a result, one of the highest household foreign currency-denominated exposures decreased to one of the lowest in Europe, from 14 per cent to 1 per cent as a percentage of GDP. The substantial appreciation of the Swiss franc pointed to the fact that, in the absence of the conversion, financial stability would have deteriorated remarkably. Although a large part of the toxic assets has disappeared, risks stemming from the high ratio of non-performing loans, foreign currency-denominated personal and vehicle loans and hence the maturity mismatch have remained, which all require regulatory intervention. Despite the improvement, however, corporate lending falls behind the dynamics needed to support sustainable economic growth. The FGS and FGS+ have helped boost SME lending, but a recovery in market-based lending is required.