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

Adam Banai, Julia Király () and Marton Nagy

No 5836, Policy Research Working Paper Series from The World Bank

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.

Keywords: Debt Markets; Banks&Banking Reform; Currencies and Exchange Rates; Bankruptcy and Resolution of Financial Distress; Emerging Markets (search for similar items in EconPapers)
Date: 2011-10-01
New Economics Papers: this item is included in nep-ban, nep-reg and nep-tra
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Working Paper: „Home high above and home deep down below?” Lending in Hungary (2012) Downloads
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