National Bank of Hungary proposed restrictions on foreign currency-denominated loans

The NMB proposal to limit forex lending should be of international interest for two reasons. First, it is symptomatic of a global hesitancy to entrust housholds with unlimited financial freedom. The proposed regulations would limit the payment-to-income ratio for low-income households to 30% for forint loans, 23% for euro-based loans and 15% for other forex loans. These limits would be set at 40%, 31% and 20% respectively for households with a net monthly income between HUF 250,000 and HUF 500,000. The second aspect of interest is that many other small European economies gave up the ability to undertake just this type of domestic economic policy action by joining the Eurozone. In the wake of the financial crisis, it will be worthwhile to observe how Hungary fared compared to its peers.

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