Gergely Gulyás: letters from banks are not relevant

Families or companies who were entitled to the moratorium in the first phase do not have to do anything if they would like to take advantage of the def erral for the next six months, too.

The most important economy protection measure

Gergely Gulyás , Minister of the Prime Minister's Office presented the new rules on the repayment moratorium in the latest government briefing. He called the extension of the loan moratorium the most important decision in economy protection, which will help families and businesses as well.

According to the latest extension, everyone can take advantage of the moratorium until 30 June 2021, under the current conditions, and

the opportunity continues to apply to loans taken out before 18 March 2020.

(The time limit is understandable, since in case of loans taken out after the outbreak of the epidemic , borrowers ha d to be aware of the circumstances in which they borrowed the money.)

The Minister also outlined the main numbers of the moratorium:

2.6 million families are eligible for the deferral;

in the first wave, 56 percent of them, nearly 1.5 million families took the opportunity.

This affected 54 percent of the 6,500 billion forint total portfolio, i.e. 3,600 billion forints,

987 thousand businesses were eligible ; 48.5 percent took advantage of the deferral, i.e. nearly half a million businesses;

and the deferral affected 4,300 billion forints, i.e. 41.7 percent of the total loan volume.

Borrowers have nothing to do

According to Gergely Gulyás, it is favourable that this money remains in the economy; during the crisis caused by the pandemic it is definitely helpful if capital can be drawn into the economy this way. He added:

Apparently, banks are not happy with the decision. In recent weeks they h ave already been sending information letters to clients, but still before the government’s decision. These letters sent out before the government's latest decision should be considered irrelevant; the government's decision is clear: anyone who wants to continue using the current repayment moratorium can do so without do ing anything as the suspension of loan repayments continues.

Changing rules

The second phase of the moratorium started when Prime Minister Viktor Orbán announced on September 19 that the loan moratorium would be extended for another six months at the end  of the year. At th at time, the PM definitely spoke about the principle of need for the moratorium,  n amely , it was to help c lients from disadvantaged social groups, i.e.

families raising or expecting a child,

pensioners,

the unemployed and jobseekers,

and people in public works programmes.

As for businesses, th ey could take advantage of the deferral if their revenues fell by more than 25 percent in the wake of the coronavirus crisis.

It was already regulated by legislation

The Prime Minister’s announcement was included in Act CVII of 2020, which was about transitional measures aiming to stabilize the situation of certain social groups and enterprises in financial difficulties.

The legislation already prescribed exactly what kind of documents individual borrowers had to submit, and so banks started collecting the se documents so that the deferral could be extended.  

However, the final decision is more favo u rable for retail customers and businesses, too.

In this way, however, banks had been w asting their time working on the previous version, and this must have upset them, the Minister ha s suggested.

In the case of businesses, the situation was different because the detailed regulations had not been disclosed yet on how companies were to prove that their turnover fell by 25 percent due to the epidemic.

However, n ow all this is irrelevant, as anyone can take advantage of the deferral without having to submit any document.

How banks see the situation

Banks can be dissatisfied with several things, indeed; though the legislation also helps them in some ways. The Hungarian Banking Association's old position is that banks themselves can better decide who needs help, because they can monitor those people who se income has decreased, and companies whose turnover has fallen.

It is a valid question, for example, whether companies that are making the deals of their lives during the pandemic, carrying out tests, selling disinfectants or do ing home deliver ies should be entitled to save money at the expense of banks. Just as the staggering rise in household savings shows that most households are still saving money for the time being (of course, there may be a lot of people in need for whom it is essential to get some help now, for example families where both parents used to work in the hospitality sector).

They worked in vain

Banks are obviously upset because they have spent a lot of time unnecessarily on creating the document ation for the previous rules and assessing the needs of the ir clients. On the other  hand, they hardly regret avoiding the major rush by borrowers expected in the last days of December.

It is financially unfavourable for them that they will not receive the delayed repayments for another six months. Their profits, however, are only slightly reduced by the moratorium, as the interest earned on deferred loans can still be included in the books.

Besides that, the fact that the duration of the loans will be extended and stocks will remain high can be advantageous for banks, as the interest s will not be remitted, they will only be paid over a longer period of time.

The moment of truth

It is also a positive point that the ‘moment of truth’ is be ing postponed further, which mean s that as long as families facing difficult ies and companies that have lost their income are not required to pay, the volume of non-performing loans will not grow, and banks will have another six months to prepare for later losses.

We should make it clear, though, that b anks are not at all pleased with this new regulation . It is no accident that the Hungarian Banking Association has warned that

if debtors can continue to pay, they should, instead of extend ing the term of their loans.