Hungarian banks say the increase in lending rates is distorting the market
Adds more comments, background
BUDAPEST, Oct 28 (Reuters) – The expansion of a program by the Hungarian government that caps rates on adjustable-rate loans to small and medium-sized businesses “distorts market conditions” and will push banks to limit lending, the country’s banking association said on Friday.
Prime Minister Viktor Orban’s government, which is keen to rein in inflation, which topped 20% in September and is still rising, said on October 22 it would include adjustable-rate corporate loans in a program to limit lending rates and seek to avoid next recession year.
Corporate loan interest rates will be capped at the 3-month interbank rate on June 28, which was 7.77%, versus Development Marton’s current rate of 16.69%, following an emergency rate hike by the central bank on Oct. 14, Secretary of Commerce Nagy said, adding that the banks would pay for the cost of the measure.
“This currently high burden on banks and the uncertainty caused by retrospective interventions in contracts has now reached a critical level that will inevitably lead to a significant decline in lending to private and corporate customers,” says a statement from the association.
The banking association pushed for targeted action, saying the system of caps on mortgage rates and corporate lending rates was “neither proportionate nor targeted”.
In May, the government announced 800 billion forints ($1.93 billion) in windfall taxes on so-called “extra profits” from banks, energy companies and other businesses. These taxes, aimed at covering a budget deficit, hit Budapest stocks and unsettled investors.
($1 = 413.47 forints)
(Reporting by Krisztina Than; Editing by Barbara Lewis)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.