Foreign Currency Loans – MNB Programs for Debt Relief, Settlement and Forint Launching

On Monday, the Posayu Bank (MNB) launched the two tenders that will provide the amount of foreign currency needed for the deletion, settlement and conversion of retail foreign currency loans.

Of the USD 3 billion offered, the banks received about USD 1 billion in offers.

At its meeting on 23 September, the Monetary Council of the MNB decided that the Posayu Bank will provide the banking sector with the necessary foreign exchange to cover the settlement of retail foreign currency loans, forint conversion, and to cover bank settlements It has set a ceiling of USD 3 billion.
As of October 13, 2014, the MNB introduced a short-term foreign currency debt reduction instrument, which was supplemented by an unconditional instrument to meet the bank’s demand arising from settlements of retail foreign currency loans.

The MNB will normally announce both USDo sales instruments at least weekly by March 30, 2015, and more frequently if necessary.

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The purpose of the central bank facility is to ensure that the first foreign currency-denominated and the second settlements between banks and customers as specified in the Clearing and Settlement Act are conducted in an orderly manner while preserving the stability of the financial system and without material impact on the forint exchange rate.
In the case of a conditional USDo sales instrument, credit institutions may submit one bid per tender, in which they must indicate the quantity of USDo to be purchased. If the credit institution’s bid exceeds the bank’s limit, the MNB automatically takes the bid into account.

An unconditional USDo sale instrument is a combination of a spot USDo purchase

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On Monday, the first day of the tenders, a bid of USD 230 million was announced in a conditional tender and accepted by the central bank. The unconditional tender received a bid of USD 750 million for the tendered amount of USD 1 billion, which was accepted by the central bank (MTI).