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UPDATE: IMF: Hungary's Largest Foreign Bks Reaffirm Commitment

(Adds detail, background)

BUDAPEST -(Dow Jones)- The six largest foreign banks active in Hungary reaffirmed at a meeting with the International Monetary Fund and the European Commission in Brussels their commitments made in May 2009 to support their Hungarian subsidiaries, the IMF said Thursday night.

"These commitments, along with the balance of payments support package, are helping Hungary weather the economic downturn and return to a sustainable growth path," the IMF said in a release published on its Web site.

The six banks, which, otherwise, are based in the European Union, were Bayerische Landesbank AG, Erste Bank AG (EBS.VI), Raiffeisen International AG (RIBH.VI), Intesa SanPaolo SpA (IMI), KBC Group NV (KBC.BT) and UniCredit SpA (UC.MI).

The "parent banks have behaved as responsible owners, increasing their exposures over the past year and maintaining adequate capital in their subsidiaries; the banking system's capital adequacy ratio was 13% in September 2009," the IMF said.

The six parent banks are expected to submit specific bilateral commitment letters in the coming weeks. The commitments include maintaining an appropriate capital adequacy ratio and exposure of at least 95% of the September 2008 level for the duration of the program, the IMF added.

The meeting was also attended by the Hungarian financial supervisor PSZAF, home country supervisors and fiscal authorities, the National Bank of Hungary, the European Bank for Reconstruction and Development, the European Investment Bank, the World Bank Group and the European Central Bank, the IMF said.

Hungary had been hit hard by the global financial crisis because of its lax fiscal policy and large external debt, making it the first E.U. country to secure IMF support last year.

Since then, the country has tightened its fiscal belt and reduced foreign currency-based lending. Investor sentiment toward the country has improved as a result. The IMF and the European Commission approved Monday that Hungary won't draw the next tranche of its EUR20-billion credit line with the IMF, the EU and the World Bank, but keep it in store should the need arise for it.

IMF Web site: www.imf.org

-By Margit Feher, Dow Jones Newswires; +361-267-0622; margit.feher@dowjones.com

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November 20, 2009 04:55 ET (09:55 GMT)


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