Hungary ‘no danger’ to Austrian lenders

VIENNA - Agence France-Presse

The debt-hit Hungarian economy is being badly hurt by forint’s big depreciation. REUTERS Photo

Austrian banks’ 30-billion-euro ($38.3-billion) exposure to troubled Hungary poses a “challenge” but lenders have sufficient funds to cope, Austria’s central bank governor said yesterday.

“It is no secret that Austria and Austrian banks have a strong involvement in Hungary. Our involvement is around 30 billion (euros), including sovereign bonds,” Ewald Nowotny told ORF public radio.

Austria may cover loss

“Austrian banks have enough capital to cover that. This means that there is no danger to Austrian banks but of course it does pose a challenge,” said Nowotny, who is also a member of the European Central Bank’s governing council.

With European Union member Hungary’s currency last week

hitting record lows against the euro and borrowing costs soaring, Budapest is seeking a 15-20-billion-euro credit line from the International Monetary Fund and the EU.

Talks have snagged however because both the EU and IMF have sharply criticized Prime Minister Viktor Orban’s revamp of Hungary’s central bank, saying it crosses a red line by increasing government influence on monetary policy.

Banks in neighboring Austria are seen by experts as being by far the most exposed to any Hungarian debt default, raising concerns in some quarters that Vienna might lose its triple-A credit rating.

Nowotny said however that “decent” results in an auction of five-year Austrian bonds on Dec. 10 -- the yield inched up to 2.2 percent from 1.96 percent in an equivalent November sale -- showed markets had “great trust” in Austria.