A big step is made towards ending the domestic debt moratorium

HUNGARY - In Brief 01 Nov 2021 by Istvan Racz
The statutory moratorium on bank debts, introduced for domestic households and non-financial enterprises as a protection against the initial Covid shock in March 2020, ended in its original form yesterday (October 31). So far, the aforementioned types of borrowers have enjoyed the right to a moratorium on all debt payments after their borrowings from domestic banks, accumulated before the scheme's introduction. From now on, only those can stay in the scheme, who are old-age pensioners, participants of social employment programs, people with dependent children, people whose income has decreased for a longer period, and enterprises whose net sales fell by at least 25% over the last 18 months, provided that they request so. According to current rules, even these latter clients can continue to enjoy the moratorium only until June 30, 2022.According to preliminary data from Hungarian Bankers' Association, only 6.5% of existing borrower clients had requested to stay in the moratorium until the deadline that expired yesterday, which represents about 13% of those eligible. It is unclear at this point what share of the total stock of existing bank credit they represent, but it seems that the size of the total debt affected will rather substantially decrease as a result. In June, the MNB wrote in its stability report that at that time, some 29% of enterprise debt and 42% of household debt to banks was still under the debt moratorium. Preliminary indications suggested that banks and the authorities expected significantly greater interest in extending the moratorium.Our first reaction is that the lack of greater client interest is most probably a good sign for financial stability;...

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