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Bad product development results in systemic market failure – Foreign currency mortgage loans to Hungarian households

András Bethlendi

Financial and Economic Review, 2015, vol. 14, issue 1, 5-30

Abstract: This article focuses on the supply side of household foreign currency mortgage loans in Hungary, on the relevant business policy aspects as well as on product development and management in a wider sense. It presents how the various risk types of this risky, longterm loan product were shifted to consumers by credit institutions. The long-term success of shifting these risks was actually prevented by its systemic aspect. The major long-term business policy mistakes are classified according to ten main features. Foreign currency lending to households in Hungary is a case study presenting that the completely laissez faire, laissez passer approach to household lending from both consumer protection and prudential points of view can lead to a systemic failure; market self-regulation does not work perfectly in the credit markets. It is difficult and time-consuming to subsequently remedy a systemic risk problem. Remedying the past problems and establishing the overall conditions for new fair lending is expected to be completed in 2015.

Keywords: household indebtedness; foreign currency lending; credit supply; systemic risk; regulation; market failure (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 G32 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (2)

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