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Hundreds of thousands of retailers and tens of thousands of corporate clients could be in trouble in January, when the credit default ends under existing rules. Both the central bank and financial institutions hope that with a continuous and targeted solution, repayments can be traced back to the affected portfolio, which accounts for about half of all loans.
Approximately 160-240 thousand retail clients and 20 thousand corporate clients may be at risk with the planned lifting of the credit moratorium introduced for the Covid-19 administration in January, said Gergely Fábián, Managing Director of the National Bank of Hungary (MNB), in the Portfolio Loan Conference.
Overall, the banking sector also sees the move as successful, with banks suspending HUF 16 billion, or 34 percent of total output, in 24 hours in March, said Jelasity Radovan, director of Erste Bank and the Hungarian Banking Association.
The MNB, the banking association, as well as the governors of the banks that participated in the conference, agreed that the lifting of the moratorium should be carried out continuously and selectively, with more risks to consider.
The central bank raises several aspects:
- A possible extension of the moratorium should be aimed at, with more benefits for the most disadvantaged debtors.
- It should not be delayed, the moratorium should be seen as a temporary measure, otherwise there may be greater moral hazard if customers get used to not having to pay.
- The Hungarian bankruptcy procedure is not suitable for company reorganization, there are very few bankruptcy procedures, it will almost always be liquidated, resulting in a large loss of value, which is worth changing.
Jelasity Radovan stated that whatever it takes from January, all banks will be able and willing to provide flexible solutions to their troubled customers. He, like the MNB, considers that the national banking system has a much more stable base for the current crisis, although its profitability fell around 80 percent in the first half of the year.
According to Jelasity, the delay will result in hundreds of billions in impairment losses in the sector over time.
What we see so far is just the beginning
-He said.
Based on Gergely Fábián’s presentation, the MNB also thinks that it is not likely to be a V, but rather a prolonged recovery in the form of a tick on the chart, which is further confirmed by the fact that the second wave of the epidemic.
Most bank executives expect loans to recover next year without a significant increase in the default rate. In comparison, Péter Felfalusi, director of accounts receivable management at Intrum Justita, expects a much higher default rate, 8 to 12 percent, as many creditors lose their jobs and are unable to pay.
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