According to the decision of the Monetary Council of the National Bank of Hungary (MNB), the MNB will allow the partial closure of bank foreign exchange swap transactions related to the withdrawal of retail foreign currency loans.
The move by the central bank’s foreign exchange reserves
According to the MNB’s announcement on Monday, the move by the central bank’s foreign exchange reserves, which was a significant easing for banks and a timely diversification of the banking system’s liquidity, was made possible.
Banks may close up to 20 percent of the value of their foreign currency purchased in clearing and forint tenders, and unconditional foreign exchange swaps expiring in March 2016. That means up to EUR 1.8 billion in foreign currency spending, the central bank said.
Creating foreclosure can contribute to accelerating bank adjustment
Thereby further reducing short-term external debt. Long-term reserve compliance is also assured while allowing for swap closure before maturity, the release states.
The MNB shall provide information on the technical and operational details of the possibility of early closing foreign exchange swaps on its website.
On September 23, 2014, the Monetary Council of the MNB decided that the central bank would provide the banking system with the amount of foreign currency necessary for the derecognition, settlement and conversion of retail foreign currency loans.
The central bank program consists of two instruments
A spot sale (spot) sale of euro linked to a short external debt reduction condition and a longer term foreign exchange swap transaction combined with a sale of spot euros.
The central bank approved a total of EUR 3 billion for settling accounts with customers, while the central bank calculated a total of EUR 9 billion for the conversion of foreign currency loans. Banks bought EUR 1 billion and EUR 8 billion of the amount offered in clearing and forint tenders (MTI).