The Hungary government is seeking to gradually get rid of all foreign currency mortgages in the country, Reuters reports. Foreign banks are likely to bring back more funds into the country. The state is looking for measures to decrease the huge foreign currency debt exposure of households and the economy after the Swiss franc recently gained, causing reduction in demand and slowdown in economic growth.
The relief scheme allows households to pay back foreign exchange (FX) mortgages at preferential exchange rates, forcing the central bank to tap its reserves to provide euro liquidity to banks to temper market volatility. Lenders such as Erste Group Bank are likely to suffer losses due to the scheme.
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