2011. október 2.
168 Óra Online írása

If security of law is gone…

  • Tetszik:

The tone of voice that currently commands Austrian media reports about Hungary, the Hungarian government and its measures have not been experienced in decades. Headlines demand Viktor Orbán “be stopped”, the Hungarian prime minister is called “the Putin of the Puszta”, and also the Vienna government—namely the Vice Chancellor and Minister of Foreign Affairs, and the finance minister—has condemned the package designed to bail out forex debtors. In the expert community. Stefan Pichler, professor at the Banking Faculty of Vienna University of Economics (WU), has been the most outspoken. He was interviewed by Ms. Júlia Szászi.

J. Sz.: In an interview you made a straightforward suggestion to Austrian banks to exit Hungary. Will the financial institutions in question heed your advice?

S. P.: Well, one always must add “if the law on the conversion designed to support forex debtors is implemented”. On the other hand, in this case it’s not just Austrian banks that need to consider leaving Hungary, but all the rest of foreign-owned financial institutions, too. It would be a painful decision, because Austrian banks have made very substantial commitments in Hungary.

J. Sz.: Dou you think it possible for a bank that has been active in Hungary for years to pack up and leave?

S. P.: It does not have to happen overnight, they have invested too much for that. But you can do it one small step at a time. If security of law is gone, Austrian banks had really better leave.

J. Sz.: Public opinions says Austrian banks have been making nice profits in Hungary.

S. P.: Not exactly in Hungary. Austrian banks operate in the entire CEE region. Erste has been focusing on neighbouring countries expressly. But in any case they all manage their portfolios as a whole, taking the view that some countries are less developed, others are more developed; some countries offer better chances for profits, others don’t. Well, the markets where losses dominate are Ukraine and Hungary, but it could have been different, it may as well have been Slovenia, for instance. The essence of the strategy is they regard the region as a whole, spreading their risks. Of course, annual results of each banks should be examined, but the portfolio of non-performing loans is undoubtedly high.

J. Sz.: Do you happen to be familiar with what the banks in question say about your suggestion?

S. P.:
Banks are now standing by, waiting to see how the law will actually look, what it says about loan payment and forex conversion. It’s a tough cookie, because banks have to provide additional loans, and there’s a fairly big room to manoeuvre in the scope of interest settlement and applying additional interest margins, so the exact details must be known for a clear view. And banks may well suffer smaller losses than estimated now. But if those losses are large enough, I think legal action will ensue.

J. Sz.: Forex loans are a problem in Austria, as well. What measures have been implemented to offset the impacts?

S. P.: First of all, banks have been banned to provide additional loans in foreign currencies. Additionally, capital accumulation have been increased dramatically to cover the risks. On the other hand, voluntary conversion into euro deigns are encouraged, and loans are being converted at market conditions, of course. Banks are trying to offer customers attractive euro loans with longer maturities, but not by extending the maturities of former Swiss franc loans but by ensuring acceptable monthly instalments.

J. Sz.: Are they tailored or standard designs?

S. P.: Individual designs. There is just a single general rule: a ban on disbursing new forex loans, which I believe Austria was too late to implement. I have always been against forex loans, warning people against it, but no one would listen. The same must have happened in Hungary. Experts must have been warning against risks, but the loans were just too attractive. In this context, banks were obviously responsible morally.

J. Sz.: Are there any insurance designs available in Austria that protect borrows from the adverse impacts of forex volatility?

S. P.: No. At least not that I know of.

J. Sz.: What do you think the objective of the Hungarian government is with the bill on final loan payment?

S. P.: I’m not sure. But when tens of thousands of people are unable to pay their loans and are threatened to lose their homes, politicians must act. It is obvious and understandable for me. If banks, including Austrian ones, have given their customers ill advice, they have to take responsibility in court, as is the case in Austria from time to time. If losses occurred from those advices, they have to pay for part of the damages. It’s a clean-cut case. Now, however, banks are forced to convert all loans, which option, however, could only be used by debtors that still have enough money to make monthly payments on their loans anyway. They are the ones that have benefited from lower interest rates before. I don’t think this forced conversion is fair. And one must not overlook the fact that Raiffeisen and Erste have been given government capital, so ultimately this package is drawing money out of Austrian taxpayers’ wallets, too. This is the reason for the harsh tone of criticism. Clearly, banks have to contribute to tackle the problem, but not in this radical way, because it violates international and EU laws. This is what triggered criticism in Austrian.

J. Sz.: According to a report in Wirtschaftsblatt you used the term “fascist”.

S. P.: I explained my view, which I uphold, by the way, that this bill is not in alignment with EU laws and the way it is implemented is fascistic. I really think this is what it is, because it is not the mechanisms of the sate of law upon which this measure is being enforced. If you want to help the people in question, you have different options: make banks pay, increase the banking tax for individual financial institutions in proportion to their respective shares in forex lending. Such measures are based on the principles of the legal state, and even if they may be criticised, they could really help people. Anything outside the legal state and democratic procedures is fascistic. I believe the bill—or the law if the bill is passed—is too radical, and is not compliant with international rules.

J. Sz.: What would be the economic consequences if Austrian banks elected to withdraw from Hungary?

S. P.: Of course, it’s not very likely that Austrian banks would give up their operations in Hungary overnight. But in fact the law in its present form would be very harmful for Hungary. Security of law is very important for investors. If it is undermined in any way, it would affect not only the entire financial sector but other investment activities, as well. And this in turn could harm the Hungarian economy at an unpredictable extent, but Austria would also suffer damages. In fact, the entire CEE region is involved. We know Americans do not really make distinctions between Hungary, Austria, and Slovenia, all of them are Central Europe. And if Americans reduce their investment here, it could create a critical situation.

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