New legislation and loans with more transparent pricing are needed
Earlier, the Magyar Nemzeti Bank already made proposals to formulate legislation in order to terminate banks’ dominant position and to facilitate debtors’ increased protection. The objective of the solution package elaborated by the MNB is similar to the intention of the 8 points raised by Members of Parliament Messrs. Antal Rogán and Lajos Kósa. However, the MNB’s proposals take into account of the predictability of the business environment, do not impair banks’ willingness to lend, and thus contribute to the recovery of the Hungarian economy.
The Magyar Nemzeti Bank has on several occasions indicated the problem of banks’ abusing their dominant position and the necessity of treating this problem. Banks’ dominant position mainly appears in the pricing of loan products. Accordingly, the Bank believes that this is a point in the relationship between customers and banks where intervention is required. Therefore, the MNB proposed to the Government, which is responsible for the codification of laws, to formulate a provision of law that allows two kinds of loan products to be offered to customers in the future: loans with fixed premium with interest linked to a reference interest rate (tracker loan) or to ones with an interest rate fixed for a longer interest period (fixed rate), and these rules should also apply to existing outstanding loans.
In addition, in agreement with the problem raised by the HFSA regarding the exchange rate applied in the repayment of foreign exchange loans, the MNB called the attention of legislators/regulators to the necessity of framing a regulation that
- prohibits the unilateral widening of the exchange rate margin applied in repayments in a way that is disadvantageous for customers;
- limits the possible extent of the margin;
- and allows the repayment of loans in foreign exchange as well.
The Bank agrees with the intention of the 8 points raised recently by Members of Parliament Messrs. Antal Rogán and Lajos Kósa, i.e. with the termination of banks’ dominant position and with the increased protection of debtors. Nevertheless, it is important to emphasise that the proposals do not interfere in the relationship between customers and banks at the right point, so the problem is in fact not treated. Moreover, there may be unwanted consequences. Of the MPs’ propositions, the ones regarding the cancellation of default interest, the unilateral prolongation of the maturity and the proposal of ‘clean slate’ (maximising the bank’s claim in 100 per cent of the collateral value in case of housing loans) create an unpredictable business environment, and may substantially impair debtors’ willingness to repay their loans, which may lead banks to reduce lending activities. Accordingly, the intervention seems to safeguard customers’ interests, but – as loans become less accessible – in fact it may trigger an impact that is contrary to the intention.
The letters entitled ‘Regulatory proposals strengthening the transparency of loans to households’ (A lakossági hitelek átláthatóságát erősítő szabályozói javaslatok) dated 27 August 2010 and ‘Comments on the proposal regarding the regulation of disbursement and repayment exchange rates applied in foreign exchange loans’ (Észrevételek a devizahitelek folyósítási és törlesztési árfolyamának szabályozásával kapcsolatos javaslatra) dated 22 July 2010 forwarded to Minister Mr. György Matolcsy and President Mr. Károly Szász are available by clicking on the links.
Pursuant to Article 60/A of Act LVIII of 2001 (MNB Act) the MNB’s initiative shall be considered a proposal to adopt a legal regulation or to initiate new legislation submitted through a minister to the Government of the Republic of Hungary or – depending on the Government’s decision – to the Minister for National Economy.
MAGYAR NEMZETI BANK