Home high above and home deep down below -- lending in Hungary, Vol. 1 of 1

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Home high above and home deep down below -- lending in Hungary

Author:	Banai, Adam; Kiraly, Julia; Nagy, Marton ;	Collection Title:	Policy Research working paper ; no. WPS 5836
Country:	Hungary;	Date Stored:	2011/10/05
Document Date:	2011/10/01	Document Type:	Policy Research Working Paper
Language:	English	Region:	Europe and Central Asia
Report Number:	WPS5836	SubTopics:	Bankruptcy and Resolution of Financial Distress; Currencies and Exchange Rates; Emerging Markets; Debt Markets; Banks & Banking Reform
Volume No:	1 of 1

Summary: In Hungary in the pre-crisis period, the bank sector-initiated private credit boom significantly contributed to the accumulation of economic imbalances. Nevertheless, before the 2008 crisis no special regulatory measure was taken to mitigate the foreign exchange lending to unhedged borrowers, which was a main moving force of the credit boom. Depreciation of forint-denominated subsidized housing loans and the increased risk premium significantly deteriorated customers' positions and resulted in rocketing nonperforming loans. A recession, deteriorating portfolios, and lack of efficient workout. The introduction of strict regulation froze banking activity and the danger of recovery without lending emerged. This paper compares the pre- and post-crisis lending activity and analyzes the lack of regulation in the pre-crisis period and the inefficient regulation in the post-crisis period.


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