By Margit Feher
BUDAPEST--Hungary's top court Monday ruled that lawmakers can
adopt legislation allowing retroactive changes to foreign-currency
loan contracts, but the changes must take into account the
interests of both borrowers and the lenders.
Foreign-currency loans--mainly mortgages tied to the Swiss
franc--were hugely popular before the financial crisis because they
were much cheaper to service than local-currency loans. They have
become a major political issue since then due to the sharp
depreciation of the Hungarian forint against the Swiss franc.
The governing Fidesz party government, which looks set to win a
second consecutive term at parliamentary elections in April, turned
to the Constitutional Court at the end of November to see how much
it could amend the contracts retroactively to the benefit of
borrowers and at the cost of lenders.
The Constitutional Court ruled that the state's intervention in
existing contracts isn't without limits. When formulating
legislation to change existing contracts, the lawmakers must seek
to balance interests of the parties involved, it said.
The ruling will likely affect all large Hungarian banks, which
provided such loans. The banks include market leader OTP Bank
Nyrt., as well as foreign-owned banks such as Austria's Erste Group
Bank AG, Raiffeisen Bank International AG, Italy's Intesa Sanpaolo
SpA, UniCredit SpA, and Belgium's KBC Group NV.
The government had claimed banks had abused their dominant
position when raising their fees and repayment amounts during the
financial crisis and because of the weaker forint, and had set
exchange-rate spread levels and contract conditions in a unilateral
way, breaching customers' constitutional rights.
Write to Margit Feher at margit.feher@wsj.com