The Hungarian Parliament has adopted an amendment to the
Hungarian Banking Act (entering into force on 7 July 2015) that
provides for the regulation of loan portfolio transfers. The
amendment aims to make Hungarian banks' lives easier by
deviating from the general rule of the Hungarian Civil Code which
normally requires a borrower to agree to the transfer between
lenders and terminates all security interests, unless the security
provider likewise agrees.
Instead, under the new amendment, such a transfer must be
authorized directly by the Hungarian National Bank, bypassing the
need for the agreement of either the borrower or the security
provider.
The Hungarian Banking Act's exemption covers only those
portfolios that consist of at least twenty loan or financial
leasing agreements, or whose value is higher than 10 billion
forints (approx. EUR 33 million). Thus, even one loan
agreement may qualify as a 'loan portfolio', provided that
the transaction value reaches the threshold.
Under this new loan portfolio transfer regime, the transferor bank
must notify each borrower and the security provider of the
transfer. Furthermore, if any conditions of the loan
agreement will change due to the transfer, express notice of these
changes must be given; however, under no circumstances may the
interest rate, fees and costs be modified. Upon receiving
notification, the borrower may terminate the loan agreement by
written notice. Should the borrower do so, the borrower's
obligations become due immediately (unless a notice period is set
forth in the terminated loan agreement).
The amendment unfortunately does not provide a complete solution to
the problems created by the general rule of the Hungarian Civil
Code (i.e. the agreement requirement from both the borrower and the
security provider and the termination of all security interests),
because it makes the transfer of the loan portfolio possible only
among financial institutions and sets forth the authorization
requirement with the Hungarian National Bank.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.