Adds more comments from the Association of Banks, background

BUDAPEST, May 26 (Reuters) – The Association of Hungarian Banks said on Wednesday it wanted to narrow the scope of those eligible for a moratorium on loan repayments as the economy rebounded, adding that imposing a significant additional burden on banks did not was more justified.

The country’s banks are in talks with the government on the future of the moratorium which expires at the end of June. Earlier this month, the government extended the moratorium on COVID-19 until the end of August to allow for further discussions. nL5N2N72SF

However, the banks‘ statement on Wednesday indicated that differences remained. The Banking Association said the overall cost of the program is expected to exceed 400 billion forints ($ 1.39 billion) and called for a more restricted system based on social eligibility.

“The main objective of the moratorium, and, in particular, the main task of the banking sector is to provide targeted and effective support specifically to those in need,” the association said in a statement.

“A program that goes beyond this goal can no longer be professionally supported by the Hungarian Banking Association, as there is no justification for incurring additional costs for the banking sector in relation to customers who have sufficient income and / or reserves to meet their financial obligations. “

The moratorium, which was introduced last year to help borrowers amid the pandemic, has been automatic unless customers ask to continue paying installments. It was initially in place for six months, then extended for six months until the end of June.

As the economy grew 1.9% better than expected quarter-on-quarter in the first three months of 2021, Hungarian banks and the central bank called for a smaller scope to help only the most vulnerable borrowers.

However, last week Prime Minister Viktor Orban, who faces elections in early 2022, told a radio station that the Banking Association’s current proposal was unacceptable. He did not go into details.

As of 12:17 p.m. GMT, shares of Hungarian bank OTP Bank OTPB.BU were up 0.9% to 15,610 forints on the Budapest Stock Exchange, slightly outperforming the blue-chip index .BUX, which gained 0.8%.

(1 USD = 286.8400 forints)

(Reporting by Krisztina Than; editing by Emelia Sithole-Matarise)

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