(Updates with Simor comments in fourth paragraph.)
Sept. 30 (Bloomberg) -- Hungary’s central bank will start offering euros through tenders to provide liquidity to banks as borrowers start repaying foreign-currency mortgages at below- market interest rates.
The tenders will be held at least once a week from Oct. 3 through Feb. 29, 2012, the Magyar Nemzeti Bank said in a statement posted on its website today.
Hungarian lawmakers last week approved a law allowing borrowers early repayment of foreign-currency mortgages at fixed exchange rates that are more than 20 percent below current market rates. The European Union warned the plan may contravene the bloc’s laws, while Moody’s Investors Service and Fitch Ratings said it set a “dangerous precedent.”
Central bank Governor Andras Simor announced Sept. 20 that the regulator will offer domestic lenders access to its reserves as the early repayment of mortgages is likely boost demand for foreign currencies, leading to a weaker forint.
Only banks with foreign-currency mortgages that can be repaid under the government program will be allowed to take part in the tenders, the bank said. About 20 percent of Hungary’s 18 billion euros ($24.6 billion) of foreign-currency mortgages are likely to be repaid, Simor said last week.
Tender offers will be accepted in declining order, starting with the highest euro-forint bid, the statement said. The bank will publish the details of the tenders every month.
--Editors: Andrew Langley, Alan Crosby
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