The European and Hungarian economies need more loans than ever for economic development and liquidity in order to counter the effects of the recession caused by the war.
At today's interest rates, the six-month extension of the interest rate freeze would cause losses of around HUF 70 billion, the equivalent of a full year's bank tax, to the banking sector. With the extra tax included, the additional financial burden on banks already exceeds HUF 500 billion – approximately the equivalent of the banking sector's full-year P/L last year. All this is being borne by the financial sector amidst economic difficulties that are also impacting financial institutions. The highly regulated banking sector also faces the additional task of putting forth any necessary provisions necessitated by the risk of recession brought about by the war. The bearing of these extra burdens will prevent the placement of some HUF 4 000 billion worth of credit, which, in turn, will result in a loss of about 1% of GDP growth.
Over the past years, the Government, MNB and the banking sector have regularly drawn the attention of the customers concerned to the safety of fixed-rate loans. Since January last year, the 3-month BUBOR has risen from 0.75% to the current 13%. By applying a BUBOR rate of 2.02%, the risk and cost of the interest rate freeze is placed solely on the banking sector, while customers have received several notices on the risks of variable interest rate loans, in line with the law and MNB regulations, as well as multiple personalised letters calling upon them to switch to a safer fixed-rate loan. The above practice does not enhance the financial awareness of customers.
For the above reasons, the Hungarian Banking Association is of the view that, instead of the introduction of a scheme that distorts market conditions, the only appropriate professional solution to securing the growth of the Hungarian economy is the gradual phasing-out of the interest rate freeze.
Budapest, 19 September 2022
The Hungarian Banking Association