Currency swap with Hungary

Agence France-Presse

"We will launch a swap operation for Swiss francs against euros," while the Hungarian central bank would provide Swiss francs for forints, a spokesman for the Swiss National Bank told AFP.

About 60 percent of loans taken out in Hungary in recent years, especially for property, were in euros and Swiss francs instead of the local unit, with reports saying recently the proportion was close to 90 percent for 2008.

Hungarian borrowers were tempted by the lower interest rates available in some other European currencies, a tactic that might have worked well while exchange rates were stable but not in the mayhem of the past 18 months.

As a result, with the stronger Swiss franc and weakening forint, thousands of Hungarian borrowers are in danger of being unable to repay their debt, adding to the pressures on the already weak economy. Last Friday, the Swiss, European and Polish central banks announced they would extend weekly swap operations at least until the end of April 2009 to bolster short-term Swiss franc money markets in Poland. The Swiss National Bank spokesman said the agreement with Hungary would be similar to the Polish one and was almost concluded.