Hungary govt plans to ease FX borrowing risks-PM

BUDAPEST, Oct 17 - Hungary's government is planning to make proposals by next week to ease the exchange rate risks linked to households' foreign currency borrowing, Prime Minister Ferenc Gyurcsany said on Friday.

Private sector credit growth has been very dynamic in Hungary in the past few years and nearly 90 percent of new household loans in Hungary this year were made in foreign currencies, mainly in euros and Swiss francs.

Gyurcsany said the government had started a discussion with the Hungarian Banking Association about the risks stemming from a weaker forint, which could increase the loan repayments of households.

"I also think this is one of the... risks that if the forint weakens significantly, then monthly repayments can rise," Gyurcsany told public television.

"We will make proposals, I think by next week, which will ease risks in this (area). I cannot say they will fully eliminate them... but they can reduce them significantly," he added.

He did not give any more details.

Gyurcsany also said the Hungarian banking sector was traditionally very conservative and therefore different from the banking sector in the United States.

"The Hungarian banking system is conservative, more of a deposit collecting banking system, therefore it has no such liquidity problems," Gyurcsany said.

In the past few days several banks operating in Hungary announced that they would impose restrictions or suspend foreign currency loans.

Foreign currency borrowing has surged in Hungary in the past years and banks cover their foreign currency exposure through swap deals.

But as swap markets have frozen up since the global financial crisis spilled over to Hungary, there is concern that banks will not be able to hedge their exposure.

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