Reuters: US Dollar Report: UPDATE 1-Hungary bank chief warns against radical steps on mortgages

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UPDATE 1-Hungary bank chief warns against radical steps on mortgages Jul 24th 2013, 11:55 Wed Jul 24, 2013 7:55am EDT * OTP Bank chief urges gov't caution over home loan plan * He says radical measure will hurt trust in Hungary * PM Orban preparing steps to help borrowers * Banks, markets bracing for impact of gov't measure By Marton Dunai and Krisztina Than BUDAPEST, July 24 (Reuters) - Hungary's most powerful businessman, Sandor Csanyi, warned on Wednesday that investor trust in Hungary would be damaged if Prime Minister Viktor Orban forces banks to take massive losses on foreign currency mortgages. The warning from Csanyi, who is chief executive of Hungary's biggest lender OTP Bank is significant because until now he has had a close relationship with Orban and kept any disagreements out of the public eye. Orban's government met on Wednesday to discuss a plan to help borrowers, who are suffering under the burden of foreign currency home loans swollen by exchange rate fluctuations. Officials say a final plan is not ready, but markets expect relief for borrowers will be at banks' expense. The OTP boss told reporters that if the government, which had already forced banks to take heavy losses, imposed another such measure, it would have a damaging effect. "Such a new step would increase distrust (towards Hungary), and reduce banks' ability to attract capital," Csanyi said. Csanyi last week sold a big chunk of his shares in the bank. That alarmed investors, already nervous about the government's mortgage scheme and volatility in emerging markets, and OTP's share price plummeted. NO MORE FOREX MORTGAGES? Orban, who has tangled repeatedly with the European Union and the International Monetary Fund over his go-it-alone style of policy-making, is seeking re-election next year. Earlier, Economy Minister Mihaly Varga said the government's ultimate aim was to phase out foreign currency home loans from the financial system, arguing that they posed social and economic risks that were not sustainable. He did not give a timetable. He said the government was proposing talks with the banks on how to achieve this objective. It was not immediately clear if the Cabinet meeting to talk about foreign exchange mortgages was still going on. Bank chief Csanyi, making his first public comments since the share sell-off, told reporters he did not know what the government was planning and that he did not sell shares to send a message over the mortgage plan. He repeated assertions by OTP executives that he sold the shares to free up capital so he could invest in agricultural businesses he also owns. On the impact of any government measures on his own bank, Csanyi said: "There cannot be a solution in the foreign currency loans issue which OTP would not survive with appropriate capital left. We may not make acquisitions in that case." Shares in OTP on the Budapest stock exchange gained 2.5 percent after his comments were published. Link this Share this Digg this Email Reprints

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