New bank legislation submitted to Hungarian parliament

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New bank legislation submitted to Hungarian parliament

Polish inflation to remains in negative territory in August

A long-term Hungarian issue related to households’ indebtedness in forex loans was back on the agenda last week. On Friday, head of parliamentary group of the ruling party Fidesz, Antal Rogán presented key features of the new legislation regarding foreign currency loans conversion. Rogán said that banks would have to return to interest rate levels valid at the time when contracts were signed and apart from this banks will not be allowed to change interest rates until April 2016. According to Mr. Rogán, repayments on forex loans should decrease from February by 25-30%. The new legislation is based on court ruling from June when the top court ruled that some practices such as unilateral interest rates changes had been against the law. According to Antal Rogán, the cost of refunds to 1.3 million borrowers would probably exceed EUR 3bn. The proposal of the new law was submitted to the Hungarian parliament and the vote is scheduled for September 24th. It is worth mentioning that taxes on banks operating in Hungary have been increased in the past substantially and are currently among highest in Europe. Nevertheless, although new law will hit banks and the conversion of FX loans might affect the Hungarian currency the forint on Friday surprisingly did not react significantly.

Regarding today’s trading in the region; an eye-catcher Augusts’ Polish inflation which is going to be released today. According to our view the Polish economy fell deeper to deflation. We believe that inflation decrease by 0.3 % y/y, mainly due to seasonally falling prices of food and clothing. Further price fall was hinder by fuel price increase, though it was only moderate compared to July. So we bet that low inflation will cement rate cut bets and keep the zloty under pressure.