March 18, 2020 / 8:50 AM / 12 days ago

UPDATE 1-Hungary central bank calls for moratorium on household loan repayments

BUDAPEST, March 18 (Reuters) - Hungary’s central bank has urged domestic banks to introduce a moratorium on household loan repayments considering the “extraordinary situation” due to the coronavirus crisis, the bank said on Wednesday.

If banks do not bring in the measure, the National Bank of Hungary (NBH) said it would ask the government to pass a decree that would enforce it.

The NBH also said it was considering restarting its mortgage note buying programme, which would provide more long-term liquidity for the banking system and reduce the financing costs of household loans.

The bank had already announced emergency steps on Monday to shore up the economy against coronavirus fallout, widening the range of collateral it accepts from banks and urging lenders to apply a loan repayment moratorium for stricken firms.

Nationalist Prime Minister Viktor Orban, facing the biggest challenge in his decade-long rule, said Hungary would need monetary and fiscal tools to mitigate the likely grave economic impact, including big job losses from the viral pandemic.

The NBH has also been injecting forint liquidity into the banking system via fx swaps since Monday on a daily basis.

Hungarian interest rates are the lowest in Central Europe, with the base rate at 0.9% and the overnight deposit rate at minus 0.05%.

The Czech central bank cut its main interest rate by 50 basis points to 1.75% at an extraordinary meeting on Monday, and the Polish central bank also slashed its benchmark interest rate by 50 basis points to 1.0%.

The forint fell to new record lows of near 350 to the euro on Wednesday morning. (Reporting by Krisztina Than; editing by Philippa Fletcher)

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