Hungarian banks want much narrower loan repayment moratorium

BUDAPEST, May 12 (Reuters) - The Hungarian Bank Association is in talks with the government about the future of a loan repayment moratorium which expires at the end of June, the General Secretary of the body told the national news agency MTI on Wednesday.

Levente Kovacs said banks welcomed some form of moratorium targeting the most vulnerable borrowers continuing, although there was no decision yet on how to transition from the current mass scheme, which covers both individuals and businesses.

Hungary’s economy went into freefall at the start of the coronavirus pandemic, contracting by more than 13 percent in the second quarter of 2020 and more than 5 percent in the year as a whole.

The moratorium, which was automatic unless customers asked to keep paying instalments, was initially put in place for six months then extended by another six months as the economy sputtered.

The government of populist premier Viktor Orban’s right-wing Fidesz party, which faces a closely contested election next April, has used one of Europe’s fastest vaccination campaigns to quickly reopen the economy, with most sectors already open.

Analysts expect a sharp rebound in economic output from the third quarter, but the pandemic’s heavy impact on the labour market and businesses may take a while to patch up.

OTP Bank, the country’s largest lender, supported the 2020 moratorium, which served both clients and the banks well and kept the financial sector stable, Deputy Chief Executive Officer Laszlo Bencsik said last week.

Bencsik, however, added at a press conference that the time was right to discontinue the massive-scale moratorium as the economy could now support most borrowers. (Reporting by Marton Dunai; Editing by Toby Chopra)