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Home high above and home deep down below -- lending in Hungary

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  • Banai, Adam
  • Kiraly, Julia
  • Nagy, Marton

Abstract

In Hungary in the pre-crisis period, the bank sector-initiated private credit boom significantly contributed to the accumulation of economic imbalances. Nevertheless, before the 2008 crisis no special regulatory measure was taken to mitigate the foreign exchange lending to unhedged borrowers, which was a main moving force of the credit boom. Depreciation of forint-denominated subsidized housing loans and the increased risk premium significantly deteriorated customers'positions and resulted in rocketing nonperforming loans. A recession, deteriorating portfolios, and lack of efficient workout. The introduction of strict regulation froze banking activity and the danger of recovery without lending emerged. This paper compares the pre- and post-crisis lending activity and analyzes the lack of regulation in the pre-crisis period and the inefficient regulation in the post-crisis period.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5836.

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Date of creation: 01 Oct 2011
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Handle: RePEc:wbk:wbrwps:5836

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Keywords: Debt Markets; Banks&Banking Reform; Currencies and Exchange Rates; Bankruptcy and Resolution of Financial Distress; Emerging Markets;

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  1. Ralph De Haas & Iman Van Lelyveld, 2008. "Internal capital markets and lending by multinational bank subsidiaries," Working Papers 105, European Bank for Reconstruction and Development, Office of the Chief Economist.
  2. Sándor Sóvágó, 2011. "Identifying supply and demand in the Hungarian corporate loan market," MNB Occasional Papers 2011/94, Magyar Nemzeti Bank (the central bank of Hungary).
  3. Ceyla Pazarbasioglu & Gudrun Johnsen & Paul Louis Ceriel Hilbers & Inci Ötker, 2005. "Assessing and Managing Rapid Credit Growth and the Role of Supervisory and Prudential Policies," IMF Working Papers 05/151, International Monetary Fund.
  4. Attila Csajbók & András Hudecz & Bálint Tamási, 2010. "Foreign currency borrowing of households in new EU member states," MNB Occasional Papers 2010/87, Magyar Nemzeti Bank (the central bank of Hungary).
  5. Basso, Henrique S. & Calvo-Gonzalez, Oscar & Jurgilas, Marius, 2007. "Financial dollarization: the role of banks and interest rates," Working Paper Series 0748, European Central Bank.
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